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VOL.   I.  MAY,   1894. 

SUBSCRIPTION,    $1.00    PER    YEAR.       SINGLE    COPIES,    2S    CENTS. 


NO.   1 


PRINCIPLES 


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PUBLISHED  QUARTERLY. 

Chamber  of  Commerce  Building. 

P     O     BOX    1504.         DENVER.   COLO. 


\. 


\ 


( 


o 


Principles  of 


MONEY 


AND 


COINAGE 


BY    THOMAS    B.    BUCHANAN. 


DENVER: 

THE    CHAMBER    OF    COMMERCE    AND    BOARD    OF    TRADE. 
1894. 


Entered  according  to  Act  of  Congress,  in  the  year  1894,  by 

THOMAS  B.    BUCHANAN, 

In  the  ofRce  of  the  Librarian  of  Congress  at  Washington,  D.  C. 


6- 


THE  DENVER  CHAMBER  OF  COMMERCE 
AND  BOARD  OF  TRADE. 


.a 

CO 


Denver,  Colo.,  March  14,  1894. 
TO  THE  PUBLIC 

"The  Principles  of  Monej''  and  Coinage,"  by  Hon.  T.  B.  Bu- 
v-    chanan,  is  published  for  those  who  desire  information  upon  the 
,,   topics  of  which  it  treats.    There  is  no  more  important  question 
"Z  before  the  people  of  America  or  the  world  to-day  than  that  of 
bimetallism  and  the  character  of  the  money  with  which  the  busi- 
ness transactions  of  the  world  must  be  conducted.    It  is  believed 
that  a  change  is  taking  place  in  public  sentiment  favoring  the  • 
more  liberal  ideas  and  the  more  liberal  use  of  silver  as  a  money 
metal.    Om-  chief  object  in   this  publication  is  to  encom'age  the 
study  of  the  money  question,  which  is  of  vital  importance  to  om* 
nation  at  the  present  time. 

All  accruing  profits  from  the  sale  of  this  publication  wiU  be 
turned  over  to  the  American  Bimetallic  League. 

Respectfully, 

W.    N.    BYERS, 
President  Denver  Chamber  of  Commerce. 

EDW.   B.    LIGHT, 
Secretary  Denver  Chamber  of  Commerce. 


389Jil3 


Marietta,  O.,  March  3,  1894. 

I  have  seeu  part  of  the  uiauuscript  prepared  by  Mr.  T.  B. 
Buchanan,  which  is  about  to  be  published  in  book  form  under 
the  auspices  of  tlie  Denver  Chamber  of  Commerce.  Fx'om  the 
well  known  character  of  Mr.  Buchanan's  writings  on  the  money 
question  and  especially  fi'om  the  chapters  I  have  seen  of  this 
book,  it  is  not  too  much  to  assure  ithe  reader  that  in  this  volume 
he  will  find  a  most  complete,  full  and  clear  statement  of  the  es- 
sential fcacts  and  argruments  covering  not  only  the  subject  of 
bimetallism,  but  the  whole  money  question. 

A.  J.  WARNER, 
President  American  Bimetallic  League. 


Denver,  Colo.,  March  14,  1894. 
DENVER  CHAMBER  OF  COMMERCE: 

Gentlemen— I  have  gone  over  Mr.  T.  B.  Buchanan's  manu- 
script quite  carefully,  and  am  more  than  pleased  with  the  manner 
in  which  he  has  handled  the  subject  of  "Coinage."  His  method 
is  systematic,  his  stj'le  agreeable  and  his  logic  both  simple  and 
convincing.  I  have,  for  the  pasit  three  years,  been  convinced  that 
on  the  general  subject  of  the  philosophy  of  money  and  exchange 
Mr.  Buchanan  is  one  of  the  best  informed  men  in  the  countiy, 
and  that  conviction  received  full  confirmation  from  my  examina- 
tion of  his  last  effort.  A  discussion  of  economic  questions  is  at 
best  dry  and  unattractive,  yet,  since  modern  political  questions 
have  become  economic  and  industrial  in  their  character,  the  peo- 
ple are  more  and  more  beginning  to  discuss  and  determine  the 
principles  xmderlying  them.  I  am  satisfied  his  book  will  be  read 
with  great  interest  and  must  be  productive  of  much  benefit. 

Very  truly  yours, 

C.  S.  THOMAS, 
Chairman  Committee  on  Bimetallism. 


The  contents  of  this  small  volume  are  in  the  main  a  series  of 
papers  contributed  to  the  Daily  Rocky  Mountain  News  in  the 
spring  of  1892,  revised  and  somewhat  enlarged  for  the  use  here 
made  of  them,  with  two  new  papers  added.  They  are  in  a  highly 
condensed  form  respecting  those  points  upon  which  there 
is  genei'al  agreement  in  the  intelligent  public  mind,  as  the 
purpose  of  the  writer  was  simply  to  aid  if  possible  in  clearing  up 
some  of  the  darker  and  more  uncertain  phases  of  a  very  impor- 
tant subject.  To  assist  in  accurately  defining  words  and  phrases 
which  are  being  constantly  used  and  abused  in  current  discus- 
sions and  to  more  clearly  describe  and  emphasize  some  facts 
which  are  essential  to  a  right  understanding  of  what  is  now  or 
wiU  soon  become  the  topmost  question  in  American  politics. 

So  far  in  the  present  agitation  of  the  coinage  question  in  this 
country,  a  persistent  effort  has  been  made  to  have  the  subject  of 
the  free  coinage  of  silver  appear  to  the  average  citizen  as  a  mat- 
ter of  local  importance  only— local  to  the  silver  producing  States, 
thrust  by  them  upon  congress  for  narrowly  selfish  ends,  and  a 
matter  in  which  the  people  of  other  States  could  only  feel  a 
languid  or  semi-philanthi-opic  interest.     It  is  not  so. 

It  is  not  merely  a  "silver  question,"  but  a  question  of  the 
common  welfare.  States  and  nations  which  do  not  produce  an 
ounce  of  silver  are  more  vitally  interested  in  the  result  than  the 
few  States  of  the  American  republic  which  have  silver  mines,  for 
it  is  a  question  of  work  and  wages  and  food  and  shelter  and 
covers  the  whole  field  of  life,  commerce,  industry  and  property 
rights  in  all  the  States  and  all  the  nations. 

At  best  these  papers  exhibit  only  a  gi'inning  skeleton  of  the 
money  question.  The  subject  must  be  clothed  with  flesh  and 
blood    and   made   warm    with  life    to   be   vorv   ntfraetivc   to    the 


vi.  PREFACE. 

average  reader  of  books.  This  must  be  done  by  making  tbe  prac- 
tical application  of  the  principles  here  sought  to  be  elucidated, 
to  tlie  every  day  affairs  and  home  life  of  the  people. 

The  papers  are  neither  historical  nor  statistical  but  the  author 
hopes  they  will  furnish  a  key  or  clue  by  which  to  correctly  inter- 
pret both  history  and  fignires.  If  they  have  any  merit  it  will  not 
become  apparent  by  a  single  careless  or  desultory  reading.  Books 
are  mainlj'  useful  as  suggesters  of  thoughts,  and  not  as  containing 
assertions  which  should  be  believed  simply  because  they  are 
printed.  Read  and  think  and  if  you  are  not  perfectly  familiar 
Avith  the  subject  then  read  and  think  agalin. 

T.  B.  B. 


Sable  op  (Contents. 


FIRST  PAPER. 


VALUE  DEFINED  AND  ITS  SOURCE  ASCERTAINED. 

Commercial  Value 13 

What  Is  It?  (Definitions  of  13  eminent  writers) 13 

What  Is  the  Source  or  Cause  of  Value? 15 

What  Is  the  Cause  of  Its  Fluctuations? 16 

Illustration  1  and  2 16 

Cost  of  Production  (defined) 17 

How  Value  Is  Measured 18 

Price  (defined)   18 

"Mint"    Price 19 


SECOND  PAPER. 


VALUE  STILL  FURTHER  CONSIDERED. 

"Intrinsic  Value"— Illustration 21 

"Face  Value"— (Meaning  of  Phrase) 22 

"Nominal  Value"— (Meaning  of  Phrase) 23 

"Real  Value"— (Meaning  of  Phrase) 23 

"Stamped  Value"— (Meaning  of  Phrase) 23 

"Legal  Tender  Value"— (Meaning  of  Phrase) 25 

"Representative  Value"— (Meaning  of  Phrase) 25 

"Coinage  Value"— (Meaning  of  Phrase) 25 

"Fixed  Value"— (Meaning  of  Phrase) 26 

"Fictitious  Value" — (Meaning  of  Phrase) 26 


viii.  TABLE  OF  CONTENTS. 

Labor  aud  Value 27 

Land,  Labor  aud  Value 27 

The  Word  iu  Other  Connections 27 

Only  One  Kind  of  Value 27 


THIRD  PAPER. 


ORIGIN   AND   DEFINITION   OF   MONEY— ITS   VALUE   AND 

NOMENCLATURE. 

Origin   of   Money 29 

Barter— Illustration 29 

Money  Defined 30 

Money  and  Law 31 

The  Value  of  Money 33 

Names  and  Numeration  of  Money 34 

"Honest  Money" 35 


FOURTH  PAPER. 


ANALYSIS  OF  THE  FUNCTIONS  OF  MONEY. 

As  a  Mediuiii  of  Exchange 37 

As  a  Measure  of  Value 37 

As  a  Legal  Means  of  Payment 40 

Illustration  No.  1 4° 

Illustration  No.  2 4o 

Othea*    Functions 4i 

Standard  4i 

Interest  upon  Money 42 


FIFTH   PAPER. 


THE  STANDARD  METAL  MONEY  SYSTEM. 

Its   Evolution 43 

Free  Coinage 45 

Monetization  and  Demonetization 47 


TABLE  OF  CONTENTS.  ix. 


SIXTH  PAPER. 


ABOUT  TOKEN  MONEY. 

Token  Money 49 

The  Value  of  Token  Money 51 

Another  Theory 53 

Paper  Tokens 53 

Counterfeiting 53 


SEVENTH  PAPER. 


FURTHER      OBSERVATIONS      UPON      STANDARD      COIN 

MONEY. 

The  Pivotal  Point 55 

Theory  of  "The  Dump" 56 

Another  Exploded  Fallacy 57 

Important  Deductions 57 

How  the  Standard  Metal  Is  Distributed 58 

A  Paradox— Illustration 59 

A  Ruse 60 


EIGHTH  PAPER. 


TOKEN    MONEY— PREMIUM    ON    GOLD— HISTORY    INTER- 
PRETED—PAR OF  EXCHANGE. 

Volume  of  Token  Money 61 

The  Ancient  Theory 62 

Two  Conclusions,  1  and  2 62 

Premium  on  Gold 63 

Historical  Phenomena  Interpreted 64 

The  Explanation 65 

Par  of  Exclian^e 65 

Illustration  No.  1 '''5 

Illustration  No.  2 ''S 


TABIvE  OF  CONTENTS. 


NINTH  PAPER. 


GRESHAM'S  LAW. 

The  Law  Extended 70 

Illustration    71 

The  Morals  of  the  Case  Illustrated 71 

Gresham's  Law  a  Fact. 72 


TENTH  PAPER. 


ELEVENTH  PAPER. 


TWELFTH   PAPER. 


73 


MONOMETALLISM  AND  BIMETALLISM. 

Monometallism— Defined  

Bimetallism — Defined  74 

The  Standard  Coin  Theory  as  Respects  Legal  Tender 75 

The  Creditor's  Side 76 

The  Debtor's  Side 76 

The  Economist's  View 77 

The  Constitutional  Arbiter .- 77 


MONOMETALLISM  AND  BIMETALLISM  CONTINUED. 

The  Mistake  of  an  Economist 79 

The  Error  Analyzed— 1—2— 3^— 5 80 

The  Ratio  of  Coinage — Illustration 83 


MONOMETALLISM  AND  BIMETALLISM  CONTINUED. 

More  of  Monometallism 87 

National  Bimetallism 88 

Not  a  Failure 91 


TABLE  OF  CONTENTS.  xi. 

The  Compensatory  Feature 92 

The  Automatic  Feature— Illustration 93 

United  States  Experience 94 

French  Experience 94 

Nothing  Arbitrary 95 


THIRTEENTH    PAPER. 


IN TEli NATIONAL   BIMETALLISM. 

The  Object  of  International  Bimetallism 98 

How  Parity  Is  Achieved 99 

Hypothesis 99 

A  More  Important  Matter 100 

Objections  to  Bimetallism— 1—2— 3— Examined 103 


FOURTEENTH  PAPER. 


"FREE"  COINAGE  OF  THE  AMERICAN  PRODUCT— THE 
GREAT  FALL  OF  PRICES  AND  THE  CONSEQUENCES— 
THE  REMEDY— THE  CONSTITUTIONAL  POWER  AND 
DUTY  OF  CONGRESS  IN  THE  PREMISES. 

The  Great  Fall  of  Prices  and  Cause 109 

Another  Cause  Assigned no 

Examined — 1—2 no 

The  Rise  of  Gold  and  Fall  of  Silver in 

Effects  of  Falling  Prices 112 

Upon  the  Merchant 112 

Upon  the  Manufacturer 113 

Upon  the  Wage  Earner 113 

Upon  the  Farmer 113 

Upon  the  Debtor n4 

Upon  the  Creditor n  5 

Upon  New  Enterprises  and  Their  Promoters n5 

General  Phenomena n6 


xii.  TABLE  OF  CONTENTvS. 

The  Remedy 1 16 

An   Awful    Crime ii6 

Regulating  the  Value  of  Money 117 

The  Unit  of  Value 118 


FIFTEENTH  PAPER. 


THE  BRITISH  INDIA  MONEY  PROBLEM. 

The  Value  of  the  Rupee 121 

A  Digression 123 

The  Change  Made  in  India  124 

The  Method   of  Redemption 125 

Reasons  Supporting  the  Experiment— 1—2— :.! 125 

Why  a  Change  Was  Made— 1—2— 3— 4— 5 127 

India   Exchange 129 

To  Stop  the  Fall  of  Silver 1 29 


SIXTEENTH  PAPER. 


A    "FIAT"    OR   PAPER   MONEY    SYSTEM-LABOR    NOTES- 
CONCLUSION. 

The  Theory  of  an  Exclusive  Paper  Money  System i->2 

The  Value  of  Paper  Money j ,2 

Objections— 1—2— 3   j , , 

Labor  Note  Money j , . 

Conclusion  j,c 


pFineiples  of  jVIoney  and  Coinage. 


FIRST     PAPER. 


VALUE  DEFINED  AND  ITS  SOURCE  ASCERTAINED. 

Commercial  Value.  The  beginning  of  aU  knowledge  of  the 
subject  of  money  is  to  obtain  a  clear  and  correct  conception,  of 
that  phenomenon  of  all  exchange  known  as  commercial  or  ex- 
change value.  We  must  inquire,  first,  What  is  value?  Second, 
What  is  its  source  or  cause?  Third,  What  is  the  cause  and  law 
of  its  fluctuations?  Foiu'th,  How  is  it  measm'ed  and  expressed 
in  the  cm-rent  transactions  of  ti-ade?  These  questions  lie  at  the 
very  threshold  of  aU  profitable  and  conclusive  investigation  of 
the  subject  and  vmless  properly  solved  all  subsequent  thought 
and  effort  will  but  multiply  doubts  and  confusion  in  the  mind  of 
the  student  and  increase  the  clouds  of  mystery  about  the  subject. 
Value  is  the  one  unbroken  thread  which  permeates  every  part  of 
the  mazy  web  of  business  where  money  and  the  language  of 
money  prevails.  To  use  another  figure,  it  is  the  heart  or  pith  of 
the  tree  which  extends  through  every  part  from  the  smallest 
root  beneath  the  soil  to  the  flower  which  blooms  on  the  topmost 
twig.  Let  us  proceed  then,  and  with  the  gi-eatest  care,  to  find 
the  proper  answers  to  the  foregoing  earliest  and  most  vital 
queries. 

What  is  Value?  To  define  it  accurately  and  In  few  words  is 
a  task  of  gi'eat  difliculty.  Nevertheless  when  once  it  is  cleai'ly 
conceived  in  the  mind  it  will  appear  eminently  simple.  So  the 
average  reader  must  not  feel  appalled  at  the  first  sight  of  the 
words  and  phrases  used  by  the  following  eminent  writers  upon 
the  subject,  for  after  a  little  study  and  reflection  they  will 
prove  not  to  be  so  formidable  as  they  at  first  appear.     Here  we 


14  PRINCIPLES  OF  MONEY  AND  COINAGE. 

liave  more  than  a  baker's  dozen  of  definitions  by  prominent  and 
well-known  authorities: 

"The  ratio  in  which  commodities  in  open  market  are  ex- 
changed against  each  other."— Cairnes. 

"Value  is  the  power  which  an  article  confers  upon  its  pos- 
sessor, irrespective  of  legal  authority  or  personal  sentiments,  of 
commanding  in  exchange  for  itself  the  labor  or  the  product  of 
the  labor  of  others."— F.  A.  Walker. 

"Value  is  the  measm'e  of  the  resistance  to  be  overcome  in 
obtaining  those  commodities  or  things  required  for  our  purposes 
—of  the  power  of  nature  over  man."— H.  C.  Carey. 

"The  ratio  between  two  services  exchanged." — Bastiat. 

"Always  and  everywhere  the  ratio  of  mutual  piu*chase  estab- 
lished between  two  services  by  their  exchange." — Perry. 

"The  quality  (of  things)  which  makes  them  exchangeable 
against  other  goods."— Roscher. 

"The  relation  resulting  from  exchange." — Levassuer. 

"The  value  of  a  product  or  a  service  can  be  expressed  only 
as  the  product  or  service  which  it  obtains  in  exchange.  If  I 
exchange  the  thing  A  against  B,  B  is  the  value  of  A  and  A  is  the 
value  of  B." — Cherbuliez. 

"Proportion  in  exchange." — Jevons. 

"Value  is  a  relation  between  the  physical  properties  of  things 
on  the  one  hand  and  man's  wants  on  the  other."— Laveleye. 

"Value  is  a  relative  expression  and  implies  a  comparison  of 
one  commodity  with  anothei*." — ^Fawcett. 

"Value  is  the  power  or  capacity  of  exchanging  for  labor  or 
for  other  commodities."— J.  R.  McCuUoch. 

"Purchasing  power." — Wayland. 

Let  us  add  another  definition  in  one  word,  though  a  long 
one,  viz.:  "Exchangeability." 

These  are  the  definitions  of  eminent  and  competent  scholars 
and  authors  and  yet  it  appears  singular  that  no  two  writers,  in 
the  great  multitude  upon  this  subject,  have  ever  defined  value 
in  the  same  words.  It  cannot  be  doubted  that  each  of  these 
authors  possessed  a  clear  conception  of  value,  but  still  they  vary 
in  their  definitions  not  only  in  words,  but  to  some  extent  in  idea. 
Witli  one  it  is  a  ratio  and  with  another  a  proportion  which  con- 
stitutes the  difference  between  value  and  price.     One  makes  it  a 


PRINCIPLES    OF    MONEY    AND    COINAGE.  15 

result  of  exchange,  while  exchange  is  the  evidence  of  value 
already  existing.  These  slight  differences  however  only  empha- 
size the  difficulty  of  the  task  heretofore  mentioned,  but  not  all 
these  writers  were  happy  in  the  choice  of  words.  It  will  repay 
the  careful  student,  especially  if  a  beginner  in  this  line  of  in- 
vestigation, to  dwell  awhile  upon  these  various  definitions  and  to 
analyze  and  test  them  by  hypothesis  and  experience;  and  by 
"hypothesis"  is  meant  merely  to  "suppose  a  case,"  which  is  a  very 
familiar  mode  of  reasoning. 

What  we  esteem  as  a  possession  and  can  part  with  for  a 
price,  has  value.  What  we  use  and  need,  but  cannot  have  with- 
out an  effort  and  some  sacrifice,  has  value. 

The  foregoing  definitions  of  value  apply  not  only  to  money 
but  to  everything  which  has  value. 

What  is  the  Source  or  Cause  of  Value?  What  has  been  said 
of  value  itself  will  indicate  its  cause  or  som-ce.  We  have  wants. 
Urgent  needs.  Those  of  the  most  primary  importance  are  food 
and  shelter.  These  wants  arise  witli  the  first  breath  of  life  and 
are  constant  to  the  last  breath.  They  are  natural  wants,  essen- 
tial to  human  existence,  and  are  imposed  by  the  laws  of  physical 
natiu'e.  Following  these  are  a  vast  number  of  others  greatly 
differing  in  degree  of  actual  necessity  and  dependent  upon  taste, 
custom,  education  and  a  great  diversity  of  circumstances  and 
varying  largely  in  different  individuals,  in  different  nations  and 
communities,  according  to  their  relative  progress  in  civilization. 
But  in  the  present  point  of  view  everything  used  is  a  thing 
wanted,  irrespective  of  the  kind  of  use,  the  necessity  of  the  use, 
its  propriety,  healthfulness  or  any  other  consideration.  Here," 
then,  as  the  first  term  of  the  formula  of  value  creation,  viz. :  A  use, 
a  want,  a  demand. 

But  this  alone  is  not  sufficient  to  create  value.  We  use  and 
need  air  to  breathe,  and  yet  atmospheric  air  has  no  commercial 
value.  We  want  and  must  have  water,  and  yet  water  has  no 
value  except  under  peculiar  conditions.  What  are  these  peculiar 
conditions?  Simply  a  limitation  of  supply.  This  then  indicates 
the  second  factor  i-equired  to  produce  commercial  value,  and  the 
formula  of  value  creation  is  then,  use,  coupled  with  limitation  of 
supply;  or,  as  ordinarily  stated,  demand  and  supply. 

The  student  will  find  a  profitable  exercise  in  testing  by  all 
the  methods  he  may  be  able  to  devise  this  statement  of  the  origin 
or  genesis  of  value.     Let  him  east  about  in  liis  mind  for  any  one 


IG  PRINCIPLES    OF    MONEY    AND    COINAGE. 

of  tke  many  thousand  tilings  which  has  a  price  in  the  market, 
and  see  if  it  is  not  amenable  for  that  value  to  the  requirements 
above  stated.  The  deductions  and  conclusions  of  monetary 
science  have  not  always  the  precision  of  mathematical  demonstra- 
tions, in  fact  rarely  so;  but  this  law  of  value  creation  is  believed 
to  be  exclusive,  universal  and  immutable.  Commercial  value  can 
never  arise  in  any  other  way. 

What  is  the  Cause  of  its  Fluctuations?  A  little  observation 
shows  us  that  valuable  things  are  exchanged  in  different  propor- 
tions one  to  another,  and  that  these  proportions  vary  frequently 
and  sometimes  widely.  Illustration— One  bushel  of  wheat  is 
sometimes  equal  in  exchange  to  two  bushels  of  corn,  sometimes 
more,  sometimes  less.  So  also  with  all  commodities  and  proper- 
ties in  an  open  market.  They  shift  their  relations  of  value  con- 
tinually. This  is  caused  by  the  varying  relations  of  demand  and 
supply.  The  production  of  useful  things  is  subject  to  so  many 
contingencies,  such  as  climate  and  war  and  pestilence;  of  fashion 
and  caprice;  of  fires  and  floods  and  a  long  catalogue  of  accidents 
and  incidents.  If  at  any  time  the  supply  of  a  thing  is  lessened 
where  the  demand  remains  the  same,  the  value  of  that  thing 
rises  as  compared  to  all  other  things  not  similarly  affected.  The 
reverse  effect  is  produced  when  the  demand  is  lessened  while  the 
supply  remains  the  same. 

It  is  well  to  note  in  passing  that  the  word  "demand"  in  this 
connection  means  a  want  accompanied  with  the  ability  to  pay 
for  the  thing  wanted.  A  pauper  may  covet  or  want  aU  the  goods 
in  a  store  without  the  ability  to  pay  for  a  tin  whistle.  Such  a 
demand  produces  no  effect  upon  the  ratios  of  exchange.  Like- 
wise the  word  "supply"  means  that  number  or  store  of  things 
which  are  offered  or  held  ready  for  exchange  within  reasonable 
reach  of  the  demand  as  to  situation  and  time.  It  is  not  the  total 
quantity  in  existence  of  any  particular  thing  which  constitutes 
the  supply  affecting  prices  or  ratios  of  value,  but  the  quantity 
offered  in  exchange  or  available  for  use.  Sometimes  this  matter 
resolves  itself  into  a  question  of  the  number  of  buyers  and  sellers 
respectively.  Illustration  No.  1.— Suppose  the  yield  of  wheat  in 
the"  United  States  in  any  given  year  is  far  in  excess  of  the  aver- 
age but  one  person  owns  it  aU,  or,  if  a  number  of  persons  own 
it,  they  combine  and  act  as  one.  Instead  of  a  fall  in  the  price 
of  wheat,  it  would  be  maintained  or  advanced,  for  by  means  of 
the  control  they  exercise  there  is  no  available  supply  below  a 
given  price.    Illustration  No.  2.— Suppose  there  are  one  thousand 


PRINCIPLES    OF    MONEY    AND    COINAGE  17 

employers  demaudiug  the  services  of  live  thousand  laborers  and 
there  are  eight  thousand  laborers  seeking  employment.  This 
statement  would  seem  to  imply  low  wages.  But  if  these  eight 
thousand  laborers  combine  in  a  union  so  as  to  act  as  one  man 
and  not  thousands,  the  ratio  between  employers  and  laborers  is 
changed  for  all  practical  purposes  into  one  thousand  demanders 
upon  the  one  side  as  against  a  single  supplier  upon  the  other,  for 
the  eiglit  thousand  laborers  speak  with  one  voice  and  act  as  one 
man. 

When  brought  to  the  last  analysis,  all  ai'tificial  changes  in 
prices  by  tariff  laws,  patent  laws,  trusts,  pools,  uniious  and  com- 
binations of  whatever  name,  are  found  to  be  effected  through 
manipulation  of  demand  and  supply,  tJie  great  natural  and  uni- 
versal law  of  value. 

Cost  of  Production.  Reverting  to  the  first  illustration  under  the 
last  preceding  head,  the  question  may  be  asked,  Why  is  a  bushel 
of  wheat  generally  or  usually  worth  more  than  a  bushel  of  corn? 
The  answer  is,  because  it  generally  or  usually  costs  more  to  pro- 
duce it.  Cost  of  production  affects  two  results;  first,  it  deter- 
mines the  general  relations  of  value  in  an  open  and  free  market, 
as  that  between  wheat  and  corn  before  mentioned;  second,  it 
determines  the  minimum  price  of  a  commodity;  which  Is  to  say, 
that  if  a  thing  will  bring  less  in  the  market  than  it  costs  to  pro- 
duce it,  production  will  cease  until  such  time  at  least  as  the  price 
to  be  obtained  wiU  return  such  cost,  and  this  is  secured  through 
a  diminished  supply  by  cessation  of  production. 

The  phrase  "cost  of  production,"  must  be  also  held  to  mean 
present  or  current  production  whether  the  particular  thing  in 
question  be  comparatively  indestructible,  as  say,  gold  or  silver, 
or  a  perishable  commodity  such  as  strictly  agricultural  products. 
Some  writers  have  sought  to  be  more  accurate  by  calling  it  the 
cost  of  reproduction.  It  would  manifestly  make  no  difference  in 
the  present  value  of  a  piece  of  gold  how  much  it  cost  tlie  miner 
of  a  hundred  or  a  thousand  years  ago  to  get  it  from  tlie  earth, 
and  there  is  much  of  several  metals  now  in  use  which  were 
mined  long  ago.  So  also  with  a  wagon  or  plow  made  thirty  years 
ago,  and  which  we  may  suppose  for  the  present  piu-pose,  to  be 
an  acceptable  implement  now.  So  far  as  cost  of  production  cuts 
any  figure  in  its  present  price  it  must  make  it  conform  to  the 
present  cost  of  producing  as  good  an  implement. 

It  must  be  said  further,  that  tlie  same  law  holds  in  cost  of 
production  as  in  determining  the  margin  of  rents.     The  landlord 


18  PRINCIPLES    OF    MONEY    AND    COINAGE. 

may  appropriate  as  reut  all  liis  land  produces  above  that  which 
is  produced  upon  the  poorest  land  which  men  are  compelled  by 
their  necessities  to  cultivate.  So  with  miners  of  the  precious 
metals;  the  bonanza  owner  can  appropriate  as  profit  all  his  mine 
produces  in  excess  of  that  produced  by  the  leanest  mine  that  it 
will  pay  to  operate.  This  rule  also  applies  in  all  manufactures 
for  a  free  market.  The  skilled  and  ingenious  and  industrious 
man  can  appropriate  as  profits  all  he  can  save  in  cost  from  what 
it  costs  tlie  most  indolent  and  slovenly  competitor  who  is  able 
to  find  a  market  and  live  at  his  business.  These  faots  and  prin- 
ciples are  important  to  be  considered  in  connection  with  current 
estimates  of  the  cost  of  producing  silver  where  calculations  are 
made  only  upon  the  product  of  the  richest  mines. 

Other  essential  considerations  however,  take  the  precious 
metals  entirely  out  of  the  list  of  products  direcly  amenable  in 
point  of  value,  to  cost  of  production.  Silver  and  gold  are  not 
"produced"  in  the  sense  that  wheat  and  corn  are.  They  are 
simply  found  where  nature  has  in  some  past  age  "hid  the  shining 
mischief  underground."  The  farmer  can  increase  the  yield  of 
wheat  at  will.  One  grain  planted  in  congenial  soil  will  in  a  few 
months  gi'ow  into  four  score.  The  silver  miner  may  spend  a 
lifetime  hunting  for  a  mine  and  never  find  it.  More  value  has 
been  expended  in  the  search  for  both  gold  and  silver  than  was 
ever  returned  from  discovered  mines.  It  is  the  same  fascination 
which  keeps  in  operation  the  gambling  table,  where  the  "bank"  is 
nearly  always  ahead,  that  maintains  the  chase  for  gold. 

How  Value  is  Measured.  Value  can  be  conceived  and  ex- 
pressed only  in  terms  of  comparison.  We  must  put  two  things 
against  each  other  in  cm-  minds  before  we  can  form  any  idea  of 
it,  and  then  by  comparison  we  measure  the  one  by  the  other. 
This  matter  will  be  ftirther  considered  in  treating  of  the  value 
measuring  function  of  money. 

Price.  If  A  and  B  are  exchanged,  A  is  the  price  of  B  and  B 
is  the  price  of  A.  Hence  price  is  the  value  of  one  thing  expressed 
in  terms  of  another  thing;  and  hence  also,  price  is  the  ratio  of 
exchange.  The  figiu-es  2  and  5  express  a  ratio.  The  figures  2, 
5  and  8  express  a  proportion.  Two  make  a  ratio,  more  than  two 
a  proportion.  When  sugar  is  sold  for  6  cents  a  pound,  we  are 
comparing  money  and  stigar,  and  get  the  result,  lit)  equals  6  cts, 
which  is  to  say  the  values  of  the  two  bear  that  ratio  to  each 
other;    but  in  fact  the  money  is  no  more  the  price  of  the  sugar 


PRINCIPLES    OF    MONEY    AND    COINAGE  19 

than  the  sugar  is  the  price  of  the  mouey.  The  dittereuce  between 
price  and  value  is,  that  the  former  expresses  the  relation  between 
two  things  only,  while  value  means  the  general  relation  existing 
in  the  mass  of  valuable  things.  Value  is  general,  price  is  specific. 
It  is  sometimes  the  case  (that  the  pa-ice  of  a  thing  expressed  in 
money  may  fall,  while  its  value  remains  unchanged.  Illustration. 
—Imagine  a  score  of  things  set  before  you  on  the  same  level,  like 
apples  upon  a  shelf.  Now  raise  one  of  them  considerably  above 
the  others.  All  the  others  wiU  be  low  as  compared  to  this  one, 
but  stiU  occupy  the  same  general  relation  to  each  other  which  they 
did  before.  If  the  one  you  elevate  be  the  one  with  which  you 
compare  each  of  the  others  in  expressing  its  price,  then  the  price 
of  all  the  19  others  has  fallen.  If,  on  the  contrary,  you  depress 
the  one  with  wiiich  you  compare  all  the  others  in  determining 
prices,  the  reverse  effect  will  be  produced.  Prices  will  have 
risen,  while  in  fact  the  general  or  value  relation  as  between,  the 
19  things  has  not  changed. 

It  appears  to  be  a  clearly  established  fact  that  the  present 
low  gold  prices  of  all  staple  commodities  throughout  the  commer- 
cial nations  is  not  due  to  any  general  change  in  the  value  rela- 
tions of  all  these  things  towai'd  human  labor  or  exertion  in  their 
production,  but  merely  to  an  exaltation  of  gold,  the  one  thing 
with  w'hich  comparison  is  made  in  ascertaining  and  expressing 
prices.  This  is  the  innermost  liernel  involved  in  the  present  con- 
test iipon  the  money  and  coinage  questions  in  the  view  of  the 
political  economist. 

As  all  exchanges  in  modern  and  civilized  commerce  are  made  -^ 
and  reckoned  in  terms  of  money,  price  is  now  generally  defined 
and  understood  to  mean  the  ratio  of  exchange  between  money  and 
aU  other  things,  expressed  in  terms  of  the  money.  We  never 
say  dollars  or  cents  are  worth  so  much  wheat,  but  that  wheat 
is  worth  so  many  dollars  or  cents;  but  it  is  not  well  to  lose  sight 
of  important  facts  that  lie  back  of  mere  custom  or  habit. 

Mint  Price.  Tliis  phrase  is  often  used  iu  connection  with 
transactions  at  a  free  mint,  to  indicate  how  many  dollars  and 
cents  will  be  given  by  the  mint  for  a  certain  weight  of  the  coin 
metal.  Vov  instance,  according  to  law  the  United  States  mint 
makes  .$'20.()7  from  one  ounce  of  gold,  and  that  is  said  to  be  the 
"mint  price"  of  gold  per  ounce.  We  consequently  say  that  gold 
is  "worth"  $20.67  an  ounce,  but  that  results  from  the  simple  fact 
that  the  mint  coins  an  ounce  into  twenty  dollars  and  has  67  cents 


7~, 


20  PRINCIPLES    OF    MONEY    AND    COINAGE. 

left  over  wiiicli  it  gives  to  tlie  owner  of  the  gold  in  silver,  nickels 
and  cent  pieces,  using  the  portion  of  metal  left  over  to  put  with 
another  larger  batch  and  so  on.  The  $20.67  which  the  depositor 
of  the  gold  has  received  is  merely  his  own  metal  which  he 
brought  but  put  into  a  different  form  and  given  a  new  and 
different  name.  It  is  not  compared  to  anything  else  to  get  at  a 
price,  but  is  simplj^  worth  $20.67  because  it  is  $20.67.  A  thing  is 
always  equal  to  itself.  A  thing  is  always  worth  itself.  To  get 
at  a  price  we  must  compare  two  different  things,  while  in  this 
case  there  is  but  one  thing  being  considered.  The  phrase  is  con- 
sequently a  form  of  expression  to  indicate  how  much  or  what 
money  a  certain  quantity  of  metal  will  make,  and  does  not 
express  any  value  at  all,  either  general  or  specific.  When  the 
owner  takes  his  $20.67  and  exchanges  it  for  wheat  or  corn  or 
labor  then  he  will  find  out  what  the  price  of  his  gold  is  and 
know  its  value  as  well. 

Some  years  since  the  w'riter  was  assured  by  a  gentleman 
claiming  to  be  an  expert  in  these  matters,  that  the  English  gov- 
ernment had  placed  a  "forced  and  fictitious  value"  upon  gold  by 
compelling  the  Bank  of  England  to  pay  £.3  17s  10  l-2d  for  each 
ounce  of  gold  deposited  with  it.  The  fact  is  that  the  Bank  of 
England  acts  as  agent  for  the  English  mint  and  gives  in  exchange 
for  each  ounce  of  gold  brought  to  it  the  amount  above  named 
in  coin,  because  that  is  what  the  gold  will  make  when  coined, 
just  as  a  depositor  of  gold  at  an  United  States  mint  gets  $20.67 
as  above  described,  and  there  is  nothing  in  either  transaction  at 
all  affecting  either  the  value  or  the  price  of  the  metal. 


PKI>X'irLES    OF    MONEY    AND    COINAGE.  21 


SECOND  PAPER. 


VALUE  STILL  FURTHER  CONSIDERED. 

The  paramount  importance  of  tlie  one  thing  commercial  value, 
amongst  all  the  things  and  circumstances  to  be  considered  in 
analyzing  the  money  question,  makes  no  further  apology  neces- 
sary in  behalf  of  another  short  paper  upon  that  theme.  It  will  be 
mainly  devoted  to  pointing  out  a  variety  of  common  errors  and 
misconceptions  concerning  value,  and  their  causes. 

"  Intrinsic  Value."  This  phrase  is  frequently  used  in  dis- 
cussing the  money  question,  and  by  persons  of  repute  and  great 
learning,  thus  implying  at  least  two  kinds  of  value  which  play  a 
part  in  the  operations  of  commerce,  and  particularly  as  respects 
money.  Even  John  Locke,  the  philosopher  and  acute  thinker  of 
two  hundred  years  ago,  made  frequent  use  of  the  word,  spelling 
it  with  a  final  "k,"  after  the  manner  of  his  time,  as  qualifying  the 
value  of  money.  It  must  be  said  however,  that  it  is  not  of  fre- 
quent use  by  the  more  competent  writers  upon  the  subject  in 
later  times,  as  its  inappropriateness  is  almost  universally  seen 
and  acknowledged.  The  word  "intrinsic"  means  inward,  inter- 
nal, inherent,  residing  Avithin;  and  applied  to  that  value  which 
is  the  subject  of  commercial  transactions,  and  which  is  expressed 
by  price,  means  that  value  is  an  inherent  property  or  quality  in 
things  and  not  simply  an  external  relation.  If  commercial  value 
were  intrinsic  it  would  be  constant  and  unchangeable  under  the 
very  circvimstances  where  we  observe  gi'eat  fluctuations.  Illus- 
tration.—The  ratio  of  value  between  wheat  and  gold  has  changed 
very  much  in  recent  years.  Sixty  pounds  of  wheat  would  for- 
merly exchange  for  $1.25  in  gold.  That  is  to  say,  that  one  bushel 
of  wheat  was  worth  about  30  grains  of  gold  and  they  would 
exchange  in  the  open  market  in  that  ratio.  Now  the  same  weight 
of  wheat  will  bring  but  00  cents  in  gold,  or  about  14  grains  of 
that  metal.    If  it  be  really  a  fall  in  the  value  of  wheat,  has  wheat 


22  PRINCIPLES    OF    MONEY    AND    COINAGE. 

cliauged  in  any  essential,  inherent  characteristic  or  chemical  con- 
stituent? Would  the  most  exhaustive  analysis  of  wheat  show 
any  mutation  whatever  in  its  inherent  elements?  Sm-ely  not. 
Upon  the  other  hand,  if  this  change  be  due  to  an  increased  value 
of  gold,  sm-ely  the  gold  has  not  changed  in  any  intrinsic  property 
or  quality.  Reduced  to  a  finer  point,  the  price  of  wheat  changes 
daily  and  sometimes  hourly.  Is  it  possible  even  to  suppose  that, 
when  wheat  goes  from  62  to  Gl  or  62  1-2  cents  a  bushel,  which  it 
may  within  the  limits  of  an  hour  in  some  markets,  that  the  wheat 
has  become  altered  in  some  mysterious  and  corresponding  man- 
ner in  any  essential  quality?    We  know  it  has  not. 

Value  is  not  intrinsic,  but  distinctly  extrinsic — an  external  re- 
lation of  things.  Very  frequently  the  word  intrinsic  is  used  to 
indicate  a  condition  or  quality  which  is  permanent,  reasonable  or 
usual  as  compared  to  one  which  is  believed  to  be  apparent  or 
temporary  or  unusual;  but  when  used  as  qualifying  value  it  is 
inappropriate  and  misleading. 

"Face  Value."  This  phrase  would  imply  that  the  value  of  a 
piece  of  money,  whether  metal  or  paper,  is  in  some  way  or  other 
expressed  or  indicated  on  its  face,  which  is  not  true.  If  a  coin 
or  piece  of  paper  money  had  inscribed  or  printed  upon  its  face 
something  like  the  following:  "This  piece  of  money  will  be  freely 
land  voluntarily  accepted  in  any  open  market  of  the  United  States, 
at  any  time  it  may  be  offered,  as  the  full  equivalent  in  exchange 
for  one  bushel  of  wheat  (or  other  commodity),  and  by  any  person 
having  the  wheat  for  sale,"  and  there  was  the  fullest  assiu'ance 
that  the  statement  would  in  every  case  be  verified,  then  there 
would  be  a  face  value  for  such  a  piece  of  money,  but  not  other- 
wise. Not  a  fixed  value  by  any  means,  but  the  thing  thus  desig- 
nated would  be  reasonably  certain  always  to  have  some  value. 
But  no  such  legend  appears  upon  the  face  of  any  money.  The 
phrase  is  simply  used  to  indicate  that  the  piece  of  monej^  to  which 
it  is  applied  has  equal  acceptance  as  of  equivalent  value  with 
other  pieces  of  the  same  name.  In  this  country  we  use  a  number 
of  different  "dollars,"  as  of  gold,  silver  and  different  kinds  of 
paper  dollars,  and  all  of  equal  value  in  the  market  with  the  stand- 
ard, which  is  the  gold  dollar.  To  say  that  any  given  dollar  is 
"worth  its  face,"  or  will  go  at  its  "face  value,"  is  simply  to  say 
that  its  value  is  the  same  as  that  of  other  dollars  in  common  use, 
be  that  what  it  may. 


PRINCIPLES    OF    MONEY    AND    COINAGE  23 

"Nominal  Value."  Since  all  civilized  peoples,  aud  some 
only  semi-civilized  use  money  of  some  kind  in  maldng  their  ex- 
exchanges  and  payments,  the  habit  is  universal  of  expressing  the 
prices  of  all  things  by  the  names  of  money  pieces.  In  fact  that 
is  perhaps  the  chief  convenience  which  money  supplies.  With 
us  all  values  and  prices  are  conveyed  to  the  mind  by  the  use  of 
the  names  "dollai*s"  and  "cents."  It  is  an  easy  and  natural  as- 
sumption therefore,  tliat  these  words,  taken  alone,  mean  some 
certain  and  fixed  value.  Sucli  howevei",  is  not  the  case.  They 
are  but  names  of  things,  just  like  hat,  plow,  wagon,  bench,  brick, 
etc.  The  value  of  a  thing  is  entirely  separate  from  its  name.  Its 
name  is  always  the  same,  while  its  value  may  change  daily.  Men 
may  meet  and  talk  about  horses  f.nd  cattle  aud  sheep  and  cotton 
and  a  thousand  other  things  and  never  think  of  prices  or  any 
v:due;  aud  yet  when  they  talk  of  dollars  and  cents  there  are  no 
other  ideas  but  those  of  value  and  pi'ice  in  tlieir  minds.  This  is 
merely  the  result  of  habit  in  reclvoning  tlie  value  of  everything 
else  by  tlie  names  of  money  pieces,  and  would  be  the  same  if  we 
used  pieces  of  bmmt  clay  called  "brick"  for  money  pieces  and  as 
the  medium  of  exchange.  Then  by  force  of  habit,  the  word 
"brick"  would  have  the  same  significance  to  us  that  "dollar"  has 
now.  Where  taxes  or  dues  are  made  payable  in  a  certain  stand- 
ard dollar,  and  other  dollars  are  subsequently  received  as  the 
equivalent  of  the  first  in  such  payments,  the  latter  are  said  to  be 
received  at  their  "nominal  value,"  which  is  only  to  say  that  as 
both  have  the  same  name  they  shall  have  the  same  acceptance. 
But  in  no  case  does  the  name  of  money,  taken  by  itself,  express 
Its  value  nor  any  value. 

•«  Real  Value."  Quite  often  this  expression  occurs  in  con- 
trast to  "nominal"  value,  but  with  just  as  little  justification.  All 
value  is  real.  A  thing  mas'  have  a  relation  of  value  toward  other 
things  to-day  and  none  to-morrow,  but  nevertheless  it  is  real  while 
it  lasts.  The  value  attaching  to  some  things  may  be  more  or  less 
permanent  than  that  attaching  to  others,  but  such  circumstance 
affords  no  proper  ground  for  the  belief  tliat  tlie  value  in  eithei* 
case  is  of  a  different  kind  from  the  other,  or  has  any  different 
source  or  quality. 

"Stamped  Value."  Tf  the  name  of  money  expressed  its 
value  or  it  was  in  any  way  indicated  on  its  face,  then  it  would 
appear  reasonable  to  suppose  that  the  stamp  really  created  its 
value.  At  any  rate,  the  belief  is  quite  prevalent  that  congi-ess  can, 
by  means  of  the  stamps  of  the  mint  or  a  printing  press,  directly 


24  PRINCIPLES    OF    MONEY    AND    COINAGE. 

confer  value  upon  pieces  of  paper  or  metal.  As  evidence  of  this 
power  we  are  referred  to  the  effect  produced  upon  a  piece  of 
silver  at  the  present  time  iu  the  United  States.  Before  it  is 
stamped  it  will  only  command  in  exchange  a  little  more  than  one- 
half  of  a  gold  dollar.  After  it  is  stamped  it  will  exchange  as  the 
fuU  equivalent  of  a  gold  dollar.  The  same  thing  is  observed  when 
the  silver  metal  is  compared  to  commodities.  It  will  buy  nearly 
double  as  much  after  it  is  coined  as  before.  We  are  also  referred 
to  a  greenback  dollar.  Before  it  is  stamped  or  printed  it  is  an 
almost  worthless  bit  of  paper.  After  it  is  stamped  it  will  ex- 
cliange  even  up  for  a  gold  dollar.  These  are  facts,  and  very 
plausible  ones  too,  as  supporting  the  assumption  that  a  stamp 
may  and  does  create  value;  but  they  are  very  delusive  facts  un- 
less rightly  understood.  If  the  answer  to  this  greenback  example 
be  that  it  is  merely  a  promise  to  pay  and  has  a  value  simply  as 
the  evidence  of  a  conti'act  by  a  responsible  party  to  deliver  to  the 
bearer  a  valuable  thing,  to  wit,  a  gold  dollar,  upon  demand,  then 
we  are  referred  to  the  case  of  the  silver  dollar  where  no  such 
contract  exists,  either  by  express  terms  or  implication.  There  the 
same  phenomenon  appears— value  conferred  by  the  stamp  of  a 
mint. 

Notwithstanding  these  appearances,  the  fact  remains  that  use, 
with  limitation  of  supply,  are  the  exclusive  factors  in  giving 
birth  to  value.  The  stamping  of  a  piece  of  paper  or  metal  into 
the  form  and  with  the  name  of  money  does  not  create  a  use  (de- 
mand) for  it.  The  use  or  demand  already  exists.  The  act  of 
the  government  in  such  case  is  wholly  an  act  directed  to  supply- 
ing such  existing  use  or  demand.  People  have  been  using  money 
for  generations.  They  are  educated  to  it,  and  it  is  firiuly  fixed  in 
their  habits  and  thoughts;  has  in  fact,  become  a  second  natiu-e 
to  them,  a  part  of  their  lives,  to  dispense  with  which  would  be 
like  changing  an  essential  mode  of  their  existence.  Money,  by 
certain  names,  is  also  an  essential  ingredient  of  every  existing 
contract  amongst  them,  and  for  all  these  reasons  the  demand  for 
money  is  positive  and  imperative.  It  is  thus  that  use,  the  first 
factor  in  the  value  formula,  is  accomated  for.  Now,  if  the  gov- 
ernment can  supply  this  demand  with  a  money  which  the  people 
will  use  as  the  equivalent  of  all  existing  money,  will  qualify  it  by 
legal  tender  for  all  the  special  uses  Avhicli  any  existing  money  has. 
and  will  properly  limit  the  (luantity.  such  money  Avill  have  the 
value  of  any  existing  money.  So  it  is  that  our  present  token 
silver  dollars  have  a   value  equivalent  to  gold,  and  not   merely 


PRINCIPLES    OF    MONEY    AND    COINAGE.  25 

'^  because  thej'  have  receivetl  the  stamp  of  the  mint.  If  the  people 
would  refuse  to  use  them  to  an  extent  that  would  ca\ise  a  re- 

/  dundancy  in  volume  in  their  hands  or  upon  tlae  market,  it  would 
soon  be  discovered  that  they  had  less  value  than  before.  By  re- 
dundancy of  volume  is  meant  a  larger  supply  as  compared  to  the 
uses. 

"Legal  Tender  Value."  Legal  tender  laws  do  not  fix  the 
value  of  money,  for  that  cannot  be  done  except  by  complete  con- 
trol of  supply  and  demand.  Under  given  circumstances  a  legal 
tender  coin  or  piece  of  paper  money  would  have  a  greater  value 
than  if  not  a  legal  tender;  but  such  result  must  always  follow  as 
an  effect  of  an  increased  or  wider  or  siu-er  use,  and  not  as  a 
direct  result  of  the  legal  tender  provision.  There  can  be  no  such 
thing  as  "legal  tender  value."  A  more  extended  analysis  of  the 
scope  and  effect  of  legal  tender  laws  wiU  appear  in  a  later  paper. 

"Representative  Value."  Some  writers  upon  this  subject 
have  conceived  the  idea  that  a  piece  of  money,  regardless  of  its 
material,  has  no  value  of  its  own  but  is  merely  a  ticket  or  coun- 
ter which  represents  the  value  which  attaches  to  oither  things. 
This  cannot  be  the  case  imless  the  piece  of  money  be  construed 
as  the  evidence  of  a  contract  between  the  holder  of  it  upon  the  one 
hand  and  the  issuer  of  it  upon  the  other,  whereby  the  issuer 
agrees  to  deliver  to  the  holder  upon  demand,  some  definite  thing 
or  quantity  of  something.  This  is  neither  the  theory  nor  the  fact 
with  reference  to  standard  coin  money.  There  can  be  no  such 
thing  as  representative  value,  except  what  may  be  held  to  apply 
to  a  promissory  note  or  other  instrument  of  like  character,  and 
then  the  promise  of  delivery  must  be  specific  as  to  number  or 
quantity. 

"Coinage  Value."  This,  like  many  other  words  and  phrases 
often  used  in  reference  to  the  subject,  cannot  be  taken  literally. 
It  is  applied  in  most  cases  to  the  material  out  of  which  token 
coins  are  made.  Since  the  mints  of  tlie  United  States  were  closed 
to  the  free  coinage  of  silver  dollars,  the  g'overnment  has  pur- 
chased large  quantities  of  silver  witli  which  to  make  token  dol- 
lars. It  pays  for  that  bullion  its  market  price  as  quoted  in  g'old, 
say  75  cents  per  ounce.  Out  of  each  ounce  it  coins  .'?1.29,  because 
by  putting  371 1-4  grains  in  each  dollar,  the  480  grains  consti- 
tuting an  ounce  will  make  $1.29  of  coin.  Hence  $1.29  is  said  to 
be  the  "coinage  value"  of  an  ounce  of  silver,  as  distinguished 
from  75  cents,  the  commercial  value  of  the  material  in  the  mar- 


26  PRINCIPLES    OP    MONEY    AND    COINAGE. 

ket  as  measured  by  comixirison  with  the  gold  doUar.  We  could 
with  the  same  propriety  use  the  same  form  of  speech  toward 
coppei-  and  niclvel  metal,  for  both  of  these  are  purchased  In  con- 
siderable quantities  for  coinage  on  government  account.  About 
$1).G0  of  live  cent  pieces  are  made  out  of  oue  pound  of  nickel 
and  about  $4.50  of  copper  cents  out  of  one  pound  of  that  metal. 
But  in  no  case  is  the  phi-ase  intended  to  indicate  the  value  of  the 
metal,  nor  even  of  the  coins  after  they  are  made. 

"  Fixed  Value."  It  is  rare  if  ever,  in  human  experience  that 
there  exists  such  a  complete  and  rigid  control  of  both  demand  and 
supply  as  would  be  necessary  to  cause  a  fixed  value  with  respect 
to  anything.  It  is  certainly  not  the  case  with  money  of  any  kind; 
for  the  verj^  existence  of  the  money  necessarily  implies  its  distri- 
bution amongst  a  large  number  of  persons  whose  wants  and 
habits  vary,  and  the  quantity  of  money  being  offered  in  exchange 
will  be  greater  or  less  one  month  with  another  and  one  year 
with  another.  Plenty  or  scarcity  of  money  available  for  use  or 
ready  to  be  exchanged  will  have  the  same  effect  upon  its  value 
as  the  same  circumstances  will  upon  the  value  of  any  com- 
modity. Variations  in  the  value  of  money  from  such  circum- 
stances are  however,  by  no  means  as  great  as  the  variations  with 
respect  to  commodities.  But  general  and  persistent  hoarding 
will  increase  the  value  of  such  part  as  remains  in  circulation,  as 
evidenced  by  falling  prices  which  always  attend  such  conditions. 
Money  has  no  "fixed"  value.  In  other  things  a  fixed  value  can 
only  result  from  the  strictest  monopoly  of  supply,  and  then  there 
is  some  risk  of  a  fluctuation  of  demand  which  no  monopoly  can 
surely  control. 

"  Fictitious  Value."  The  value  which  pertains  to  token  coins 
is  sometimes  called  a  "fictitious"  value,  and  that  word  is  used  in 
contradistinction  to  the  word  intrinsic;  but  as  there  is  but  one 
source  and  kind  of  value,  and  that  which  pertains  to  a  token  coin 
is  the  same  in  every  feature  of  origin  and  quality  as  that  of  a 
standard  coin,  there  seems  to  be  no  pi-oper  ground  for  calling  it 
fictitious,  nor  for  calling  any  instance  of  value  a  fictitious  one. 
The  mere  fact  that  anything  has  a  greater  value  at  one  time  than 
another,  or  in  one  state  or  condition  than  in  another,  affords  no 
reason  in  itself  for  supposing  that  a  fiction  has  been  created.  The 
determination  of  values  is  one  of  the  severest,  commonest  and 
most  practical  facts  of  everyday  human  experience.  From  its 
nature  and  source  v:due  is  a  verv  fluctuating  thing. 


PRINCIPLES    OF    MONEY    AND    COINAGE.  27 

Labor  and  Value.  The  relation  between  labor  and  value 
may  be  stated  thiis:  Labor  produces  all  valuable  things  which 
are  created  or  fashioned  by  human  agency.  But  not  all  labor 
creates  value.  It  AAill  be  wasted  if  directed  toward  useless  ob- 
jects. A  use  or  demand  for  a  thing  must  first  exist.  That  being 
granted,  then  labor  bestowed  in  supplying  that  demand  will  be 
rewai'ded  with  value,  and  subject  to  certain  conditions  and  limi- 
tations heretofore  indicated  under  "Cost  of  Production,"  the  re- 
ward should  be  proportioned  to  the  amount  of  labor  and  sldU 
requii'ed  in  the  production.  -^ 

Land,  Labor  and  Value.  Land,  in  the  broadest  meaning  of 
the  word,  includes  all  that  is  on  it  and  in  it,  in  a  state  of  natiu-e. 
The  use  and  demand  for  land  is  the  first  and  most  indispensable 
requirement  of  human  existence.  It  has  a  commercial  value  just 
in  the  proportion  that  the  quantity  or  area  subject  and  available 
for  certain  uses  is  limited.  A  lot  in  the  center  of  a  large  city 
is  worh  more  than  one  in  like  situation  in  a  small  citjs  worth 
more  near  a  city  than  at  a  greater  distance.  It  is  useful  in  a  city 
merely  as  space,  or  for  its  area;  in  the  country,  for  its  fertility. 
But  whether  in  a  city  or  town  or  in  a  rural  region,  the  value  of 
land  does  not  arise  from  labor  directly  expended  in  its  creation, 
for  no  man  or  men  made  the  land,  and  in  all  countries  the  most 
valuable  land  is  perhaps  that  which  never  received  a  stroke  of 
human  labor.  It  arises  solely  from  the  presence  of  a  large  popu- 
lation and  its  needs,  and  the  limitation  of  the  area  which  can 
supply  those  needs.  Hence  it  is  held  by  some  that  as  land  values 
arise  from  the  presence,  the  labors  and  the  needs  of  the  mass, 
they  should  be  appropriated  and  administered  for  the  benefit  of 
the  mass.  As  society  creates  the  value,  that  society  should  enjoy 
it.  This  value  of  land  when  appropriated  by  individuals  is  termed 
the  "unearned  increment." 

The  Word  in  Other  Connections.  When  we  speak  of  a  "val- 
uable" citizen,  a  "valuable"  medicine,  a  "valuable"  agent  or  in- 
sti'umentality,  a  "valuable"  adjunct,  a  "valued"  friend,  or  an  idea 
of  great  "value,"  etc.,  etc.,  we  use  the  word  as  a  synonym  for 
useful,  effective,  beneficial  or  appropriate,  and  do  not  mean  that 
value  which  is  expressed  by  a  price. 

Only  One  Kind  of  Value.  Finally,  let  it  be  said  respecting 
value,  that  there  is  but  one  kind  in  any  manner  involved  in  com- 
mercial processes.  It  is  the  same  in  all  kinds  of  money.  The 
same  in  the  money  as  in  the  commodity.    One  kind  and  no  more. 


28  PRINCIPLES    OF    MONEY    AND    COINAGE. 

oue  soiu'ce  and  no  other.  The  habit  of  speaking  of  "money  value" 
and  "commodity  value,"  referaing  to  a  token  silver  dollar  and  its 
material  in  some  other  form,  is  useless  and  confusing.  A  table 
has  a  value  as  a  table.  Split  it  up  into  kindling  wood  and  it  is 
no  longer  a  table,  and  consequently  no  longer  has  the  uses  nor 
the  value  of  a  table.  Being  kindling  wood,  it  has  the  value  of 
kindling  wood.  The  same  is  true  of  a  token  silver  dollar.  "Ham- 
mer the  fiat  out  of  it,"  as  sometimes  said,  and  it  is  no  longei'  a 
doUar,  but  something  else.  Not  being  a  dollar,  nor  having  the 
uses  of  a  doUar,  it  no  longer  has  the  value  of  a  dollar.  There  is 
no  such  thing  as  "fiat  value." 


PRINCIPLES    OF    MONEY    AND    COINAGE.  29 


THIRD    PAPER. 


ORIGIN   AND   DEFINITION   OF   MONEY— ITS   VALUE   AND 

NOMENCLATURE. 

Origin  of  Money.  The  liistOTj  of  money,  in  the  broader 
meaning  of  that  term,  is  quite  well  known  to  the  great  majority 
of  persons,  also  the  long  list  of  things  which  have  been  used  as 
money  by  different  nations  tribes  and  communities  of  people  in 
all  parts  of  the  world  and  in  all  stages  of  civilization.  The  use 
of  some  ai'ticle  for  that  purpose  appears  to  immediately  follow 
the  institution  or  recognition  of  private  pi'operty;  and  hence  a 
people  in  a  very  low  state  of  civilization  soon  discover  and  ap- 
preciate its  convenience.  It  can  never  precede  the  recognition 
of  private  property  because  it  is  not  needed  until  the  exchange 
of  property  and  services  arises— until  buying  and  selling  begins. 

The  particular  time  in  the  world's  history  when  some  com- 
mon medium  of  exchange  was  adopted  is  not  known,  nor  the 
people  who  first  resorted  to  the  expedient.  Like  nearly  all  hu- 
man institutions  it  was  undoubtedly  a  product  of  evolution— a 
custom  which  grew  gradually  out  of  the  necessities  of  the  people, 
as  their  intelligence  and  commerce  increased. 

Barter.  The  first  exchanges  were  by  barter,  in  which  the 
value  relations  of  things  were  agreed  upon  without  reference  to 
any  common  measm-e.  Horses,  cattle,  sheep,  sMns,  ornaments 
and  crude  tools  and  weapons  of  war  were  exchanged,  the  one 
directly  for  the  other,  in  the  ratio  in  which  they  were  generally 
esteemed  in  the  tilibe  or  community.  As  man's  power  over  na- 
ture increased,  the  vanious  items  of  property  increased;  and  it 
soon  became  very  inconvenient  and  wasteful  of  both  time  and 
effort  for  one  individual  who  had  a  surplus  to  find  the  individual 
who  had  a  pressing  and  present  want  to  correspond,  and  whose 
surplus  corresponded  exactly  with  the  want  of  the  first  party. 
Thus  by  degrees  and  from  necessity  some  one  article  of  property 


30  PRINCIPLES  OF   MONEY   AND  COINAGE. 

came  into  use  as  a  common  medium  of  exchange,  and  vory  ■itwm 
aajJM^Jitt'a.H^n  fif>Bifcwaftitt*Miiiii>  Mninrllinm  of  ivrhuim^  and  very  soon 
as  we  lind  in  liistory,  tliis  medium  of  exchange  became  the  thins 
in  which  the  comparative  wealth  of  individuals  was  reckoned. 
So  it  came  that  men  Avere  said  to  possess  or  be  worth  so  many 
cattle,  or  sheep,  or  ponies,  or  slaves,  just  as  we  now  say  a  man 
is  worth  so  many  dollars.  The  thing,  no  matter  what  it  was, 
which  thus  became,  by  a  process  of  natural  selection  the  medium 
of  exchange,  became  the  money  of  that  people. 

The  main  features  of  barter  exchange  are  however  more  per- 
fectly preserved  in  the  processes  of  modern  commerce  than  most 
people  imagine.  Now,  instead  of  bartering  our  labor  or  com- 
modities directly  for  the  food  and  the  different  items  of  om*  needs, 
we  first  barter  them  for  money,  and  then  barter  the  money  for 
other  things.  As  Mr.  Bonamy  Price  aptly  says,  exchanges  with 
monej'  are  merely  pi'ocesses  of  "double  barter." 

It  m-ay  be  doubted  whether  the  saving  of  time  and  labor  in 
the  actual  process  of  exchange  is  the  greatest  benefit  derived 
from  the  use  of  money.  The  advantage  of  having  a  common 
measure  bj"  which  to  estimate  and  compare  values  is  at  least  an 
equal  convenience.  However  this  may  be,  both  these  functions 
of  money  are  inddspensible  in  modern  commerce.  Imagine  the 
difiiculty  of  constructing  a  Price  Current  or  market  report,  if 
there  were  no  one  thing  with  which  to  compare  all  other  things, 
and  in  the  terms  of  which  to  quote  prices.  lUvxstration.— One 
poimd  of  wool  is  equal  to  four  pounds  of  cotton,  and  six  pounds 
of  cotton  are  equal  to  one  and  a  half  pounds  of  coffee,  and  ten 
pounds  of  coffee  are  equal  to  three  yards  of  cloth,  and  one 
yard  of  cloth  is  equal  to  two  pounds  of  butter,  and  six  i)oimds 
of  butter  are  equal  to  one  axe.  Now,  how  many  pounds  of  wool 
does  it  take  to  buy  five  axes?  This  would  be  one  of  the  common 
problems  of  trade  if  we  had  no  money  nor  money  names  by 
which  to  measure  and  express  prices. 

Money  Defined.  Volumes  have  been  written  to  answer  the 
quesion,  "What  is  money?"  Many  writers  have  pursued  the  sub- 
ject all  around  the  world  and  thi-ough  the  realms  of  psychology 
and  back  again,  and  certainly  to  very  little  profit.  Whatever  is 
used  by  a  people  as  a  common  medium  of  exchange,  a  common 
(^easure  of  value^and  as  a  means  of  paying  debts,  that  is  money. 
These  are  the  chief  uses  of  money,  and  as  Professor  F.  A.  Walker 
has  very  well  said,  whatever  does  the  money  work  is  the  money 
thing.     It  is  much  easier  to  define  money  than  value.     It  is  also 


^^    '-^^ 


'-t)^ 


PRINCIPLES    OP    MONEY    AND    COINAGE.  31 

mueli  easier  to  define  money  than  to  correctly  analyze  and  ex-  / 
hibit  the  manner  in  which  it  discharges  its  different  functions 
as  we  shall  see  in  the  next  paper.  In  our  time  and  country  the 
people  use  pieces  of  silver  and  gold  and  nickel  and  copper  and 
paper  as  money.  All  these  pieces  are  money  with  us,  because 
they  each  and  all  discharge  the  functions  of  money.  If  any 
people  use  cattle,  or  skins,  or  shells  as  a  common  medium,  a  com- 
mon measure  and  a  common  means  of  payment,  then  such  is  the 
money  of  that  people.  One  kind  of  money  may  be  better  than 
another,  one  material  may  be  better  suited  to  such  uses  than  an- 
other, and  all  money  may  not  have  precisely  the  same  legal  func- 
tions, but  nevertheless  what  is  used  for  money  is  money. 

Money  and  Law.  To  say  that  any  particular  thing  is  a  com- 
mon medium  of  exchange  and  a  icommon  measure  of  values  and 
means  of  payment,  means  that  it  is  in  general  use  for  such  pm*- 
poses.  If  this  common  use  is  a  purely  voluntary  one,  a  resiilt  of 
habit  or  custom  or  convenience  or  all  three  together,  then  the 
thing  so  used  is  money  though  there  be  no  statute  law  upon 
the  subject.  If  individuals  are  in  the  habit  of  contracting  in 
terms  of  the  thing  in  such  common  and  voluntary  use,  then  the 
courts  should  and  would  enforce  such  contracts,  for  in  these  mat- 
ters it  is  their  function  to  interpreit  and  enforce  contracts,  not  to 
make  them.  As  money,  in  the  primary  meaning  of  that  word, 
signifies  merely  that  thing  or  those  things  which  are  in  common 
use  among  a  people  for  the  purposes  before  described,  and  as  this 
common  use  means  a  general  custom  or  habit,  and  as  custom  is 
law  in  the  absence  of  statutes,  it  is  only  in  this  qualified  sense 
that  law  is  the  cx-eator  of  money.  But  statue  law  is  not  essential  T^^/^^i'-t 
to  the  existence  of  money.  '  > 

Much  the  larger  part  of  the  uses  of  money  are  not  compul-  -^ 

soiy  by  means  of  positive  enactment,  but  pm"ely  voluntary  on 
the  part  of  the  citizen.  I  am  not  aware  that  there  is  any  law  in 
this  country  nor  among  any  civilized  people,  compelling  the  citi- 
zen to  sell  his  commodities  or  iproperty  for  money,  nor  indeed  to 
sell  at  all.  Circumstances  compel  him  to  do  so,  not  statute  law. 
The  money  of  a  people  is  their  chief  instrument  of  association 
in  a  commercial  and  industrial  sense.  The  citizen  who  would 
refuse  to  accept  or  use  or  recognize  money  would  find  himself 
as  completely  isolated  in  a  crowded  mod(>rn  mart  of  trade  as 
Robinson  Crusoe  in  his  island  home.  It  would  be  impossible  for 
such  a  person  to  supply  his  wants  if  he  attempted  to  live  as  a 
modern,  civilized  and  intelligent  being.     lie  might  be  ever  so  in- 


32  PRINCIPLES    OF    MONEY    AND    COINAGE. 

cUistrious,  so  far  as  sucli  a  habit  would  permit  the  opportunity, 
antl  be  able  to  create  by  his  labor  a  profusion  of  valuable  com- 
modities; but  if  he  refused  to  use  money  as  the  instrument  of 
their  exchange  he  would  perish  in  the  midst  of  abundance.  If 
his  products  happened  not  to  be  those  which  he  could  eat  and 
wear,  he  Avould  starve  and  freeze  in  the  possession  of  great 
wealth.  It  is  thus  that  we  are  all  the  subjects  of  our  environ- 
ment. Often  the  victims  of  our  surroundings.  It  is  thus  also, 
that  Ave  are  impressed  with  the  prime  importance  of  the  func- 
tions which  money  performs  in  modern  and  highly  organized 
society,  notwithstanding  that  nineteen-twentieths  of  the  uses  of 
money  are  entirely  voluntary,  so  far  as  statute  law  is  concerned. 

Because  of  these  facts  and  circumstances,  a  dearth  of  money 
stops  exchanges,  arrests  progi'ess  and  begets  social  confusion,  dis- 
integration and  decay.  A  total  absence  of  money  would  be  a  con- 
dition of  social  death — a  relapse  into  barbarism. 

In  the  past,  as  society  became  more  and  more  complex,  in- 
dustry more  and  more  diversilied,  the  number  of  useful  things 
vastly  multiplied,  the  v^^ants  of  people  correspondingly  increased 
and  their  ingenuity  and  enterprise  more  and  more  stimulated, 
the  money  of  the  people  has  become  a  matter  of  more  and  more 
vital  importance.  As  these  tendencies  grew,  uniformity  in  money 
became  of  greater  necessity,  for  whereas  in  an  earlier  period  a 
neighborhood  money  might  answer  all  practical  requirements,  at 
a  later  time  the  people  of  different  neighborhoods,  cities,  com- 
mimities  and  states,  occupying  different  latitudes,  under  differ- 
ent climates,  with  different  natural  elements  and  resources  and 
consequently  different  products,  found  it  advantageous  to  be  more 
intimately  associated  in  commerce.  The  gi*owth  of  transporta- 
tion facilities  has  constantly  aided  and  emphasized  the  necessity 
and  advantages  of  wider  commercial  intercoiu'se.  So  that  finally 
the  control  of  money  was  given  over  to  society  in  its  largest 
organized  form,  national  government,  to  be  by  it  fabricated  regu- 
lated and  supplied  to  the  people.  Local  customs  have  gi*a dually 
crystallized  into  national  laws,  and  now  at  this  day,  the  inter- 
national featiu-es  of  the  subject  seem  to  be  the  leading  features. 

The  thought  here  occurs,  if  the  experience  of  mankind  has 
finally  demonstrated  it  to  be  advantageous  and  necessaiy  to  have 
a  common  money  standard  for  tlie  purpose  of  facilitating  interna- 
tional commerce,  why  .should  nations  interpose  absurd  laws  of 
taxation  to  cripple  and  hinder  such  intercourse? 


PRINCIPLES    OF    MONEY    AND    COINAGE.  33 

lu  exercisiug  the  delegated  power  of  coutrol  aud  udmiuistra- 
tiou  of  the  subject  of  money,  the  goverumeiit  of  the  United  States 
never  until  recent  j^ears,  assumed  to  discard  and  prohibit  the  use 
in  standard  form  of  any  money  which  the  custom  aud  habits  of 
the  people  have  sanctioned  in  the  past,  and  with  which  they  were 
still  content.  This  was  done  in  1873  with  reference  to  the  silver 
metal.  Similar  action  about  the  same  time  by  many  Em'opean 
nations  has  made  the  silver  question  a  chief  topic  of  discussion 
all  over  the  earth,  even  to  the  remotest  islands  of  the  sea.  The 
circumstances  of  this  action  and  the  motives  which  prompted  it 
are  undergoing  critical  investigation.  It  cannot  be  m'ged  in  de- 
fense tjiat  it  was  done  to  secure  a  greater  uniformity  in  standard 
betw'een  the  nations,  for  the  silver  metal  was  at  the  time  that 
policy  was  inaugiu'ated,  a  common  standard  with  more  than  nine- 
tenths  of  the  inhabitants  of  the  globe.  As  we  proceed  with  these 
chapters  the  diligent  reader  may  be  able  to  divine  a  motive  for  it. 

The  Value  of  Money.  Here  we  recur  again  to  our  first  and 
principal  topic— value.  It  is  the  most  vital  feature  of  any  money. 
As  we  have  heretofore  discovered  that  there  is  but  one  kind  of 
value  and  no  more,  and  that  has  just  one  source  and  no  other, 
it  follows  then  that  tlie  value  of  money  is  in  no  respect  different 
from  that  which  pertains  to  all  other  valuable  things.  It  has  the 
same  source  and  is  in  every  aspect  subject  to  the  same  laws. 
The  writer  speaks  from  experience  in  asserting  that  there  is 
great  satisfaction  realized  by  the  perplexed  student  of  the  sub- 
ject when  this  one  central  fact  is  clearly  and  comprehensively 
grasped.  The  mystery  of  the  money  question  begins  to  disappear. 
As  the  only  means  of  ascertaining  the  value  of  any  commodity  is 
to  find  out  how  much  of  something  else  it  will  obtain  by  ex- 
change, it  is  the  same  with  money.  As  aU  commodities  fluctuate 
in  value  with  the  variations  of  supply  and  demand,  just  so  with  ^''V^Xrz 
money.  Some  things  fluctuate  more  than  others,  owing  to  the 
uses  they  have,  because  they  are  perishable,  or  because  of  many 
other  contingencies.  If  the  thing  selected  for  money  iises  be  of 
the  more  fluctuating  kind  all  the  worse;  if  of  the  less  fluctuating 
kind  all  the  better. 

Mr.  Walter  Bagehot,  a  merchant  and  broker  of  London  was 
a  very  bright  and  voluminous  writer  upon  the  subjects  of  money 
and  finance  in  recent  years  and  one  of  his  books  entitled  "Lom- 
bard Street,"  has  received  high  encomiums  in  intelligent  financial 
circles.  Yet  throughout  this  book  he  treats  the  rate  of  interest 
ns  the  value  (price)  of  money.    Such  mistakes  are  however  very 


34  PRINCIPLES  OF  MONEY  AND  COINAGE. 

couimon,  but  should  not  be  made  by  experts.  Illustration. — Sup- 
pose you  meet  an  acquaintance  upon  'Change  and  ask  him,  "What 
is  wheat  worth  to-day?"  He  answers,  "Sixty  cents  a  bushel." 
In  a  few  moments  you  meet  another  and  ask  him,  "What  is 
money  worth  to-day?"  He  answers,  "Six  per  cent."  In  the  first 
answer  you  get  the  price  of  wheat,  while  in  the  second  you  get 
the  rate  of  hire.  The  rate  of  interest  is  no  more  the  value  of 
money,  nor  its  price,  than  the  money  j'ou  pay  the  liveryman  for 
a  day's  use  of  a  horse  is  the  purchase  price  of  the  animal.  So 
different  are  they  in  fact,  that  often  when  money  is  dearest  in 
piu'chasing  power  it  is  cheapest  in  rate  of  interest.  Borrowing 
money  is  not  buying  money,  but  simply  hiring  it  upon  an  agree- 
ment to  return  it. 

Names  and  Numeration  of  Money.  The  United  States  and 
France  and  some  other  countries  have  decimal  systems  of  money. 
With  us  the  "dollar"  is  unit  or  one.    Our  table  of  money  is  this: 

10  mills  make  1  cent.  • 

10  cents  make  1  dime  (formerly  written  disme). 

10  dimes  make  1  dollar  (unit). 

10  dollars  make  1  eagle. 

In  practice  however .  we  ignore  the  dime  and  eagle  denomi- 
nations and  reckon  only  in  doUars  and  cents.  Sums  less  than 
one  dollar  we  call  so  many  cents.  Sums  greater  so  many  doUars, 
though  they  may  run  to  thousands  or  millions.  We  rarely  or 
never  use  the  "mill"  denomination  (a  word  anglicized  from  mille, 
thousand,  because  it  is  the  thousandth  part  of  a  doUar)  except  for 
estimating  and  levjnng  taxes.  We  have  never  had  a  coin  nor 
piece  of  money  of  that  name.  It  is  an  ideal  division  of  a  cent 
for  convenience  in  mathematical  calculations  and  is  an  illustra- 
tion of  what  is  known  as  "money  of  account,"  although  that 
phi'ase  is  sometimes  differently  and  incorrectly  applied.  The  use 
of  the  word  mill  is  more  convenient  than  to  express  the  same 
thing  in  either  decimals  or  vulgnr  fractions  of  a  cent.  Whatever 
the  value  of  a  dollar,  the  one-hundredth  part  of  that  is  the  value 
of  a  cent,  and  the  thousandth  part  the  value  indicated  by  the  word 
mill. 

Three  points  may  be  especially  noted  here:  First,  the  words 
"dollar"  and  "cent"  are  mere  names  of  things,  and  do  not  and 
cannot,  taken  alone,  express  any  value  whatever.  Second,  every 
dollar  is  composed  of  100  cents,  no  ma.tter  what  its  value.  And 
hence,  third,  the  phrase  "sixtj--cent  dollar,"  is  a  solecism-^n  ab- 


PRINCIPLES    OF    MONEY    AND    COINAGE.  35 

sui-dity.  The  difference  in  value  between  dollars  cannot  be  prop- 
erly expressed  by  alloting  more  or  less  cents  to  tbe  one  or  the 
other.  That  would  be  like  distingnishlng  a  large  circle  from  a 
smaller  one  by  saying  that  one  contained  only  300  degrees.  The 
circle  described  by  the  equator  is  of  360  degrees,  and  the  cir- 
cumference of  a  mustard  seed  just  the  same  number. 

"Honest  Money."  If  this  phrase  has  any  meaning,  it  must 
indicate  that  money  which  never  varies  in  its  value  or  purchas- 
ing power.  As  value  attached  to  money  as  well  as  everything 
else,  is  a  proportion  amongst  things  that  must  necessarily  shift 
with  every  change  of  quantity  or  supply  upon  the  one  hand  and 
demand  or  use  upon  the  other,  it  follows  as  a  plain  matter  of 
common  sense  deduction  that  there  is  not  now  and  never  has  been 
in  the  history  of  the  world  a  money  of  unchanging  value,  and 
lience  no  such  thing  as  honest  money.  Science  aud  morals  de- 
mand the  nearest  approximation  possible,  and  this  demand  and 
need  will  in  all  probability  become  more  and  more  empliatic  as 
civilization  progresses. 


PRINCIPLES    OF    MONEY    AND    COINAGE.  37 


FOURTH    PAPER. 


ANALYSIS  OF  THE  FUNCTIONS  OF  MONEY. 

As  a  Medium  of  Exchange.  Little  more  need  be  said  of  this 
function  of  money.  It  is  very  well  understood  generally,  and  its 
gi-eat  importance  and  convenience  well  appreciated.  In  the  mod- 
em forms  of  money  it  is  usually  subdivided  into  pieces  of  differ- 
ent names  and  values  so  as  to  afford  every  means  of  offering 
equivalents  in  exchange  for  the  greatest  as  well  as  the  smallest 
items  of  property  or  services  to  which  people  attach  value.  Where 
the  fiftieth  part  of  the  cheapest  day's  labor  of  ten  hours,  has  an 
equivalent  in  a  coin  (the  one-cent  piece)  as  with  us,  there  is  no 
need  for  a  smaller  denomination  for  pm-poses  of  actual  exchange. 

As  a  Measure  of  Value.  The  manner  in  which  money  per- 
forms this  second  function  is  more  or  less  clearly  described  by 
most  writers  upon  the  subject  but  not  often  in  a  manner  to 
make  it  entirely  comprehensible  by  the  common  mind.  This  is 
really  the  "standard  of  value"  function  instead  of  the  legal  ten- 
der feature  to  which  the  large  majority  of  authors  give  that 
name.  We  measm*e  the  value  of  all  other  things  against  the  value 
of  money;  and  this  custom  grows  naturally  and  inevitably  out  of 
the  use  of  money  as  a  medium  of  exchange.  The  universal  habit 
of  measuring  values  by  and  expressing  the  result  in  terms  of 
money,  makes  the  money  the  standard  of  value,  whether  we  call 
it  so  or  not.  To  measure  a  thing  implies  and  malvcs  necessary  a 
standard  of  comparison.  In  measm"ing  length  we  use  some  in- 
strument having  a  definite  length  called  a  "yard"  or  a  "foot," 
and  by  comparison  determine  how  many  times  the  one  is  con- 
tained in  the  other.  In  measuring  weight  we  take  an  object 
having  a  definite  and  fixed  specific  gravitj%  call  it  a  "pound," 
put  it  upon  one  end  of  the  balances  and  the  thing  to  be  measured 
Cweighed)  upon  the  other,  and  by  comparison  or  testing  deter- 
mine how   many   times   the  one   is  contained    in    the   otlier.     So 


389213 


38  PRINCIPLES    OF    MONEY    AND    COINAGE. 

likewise  iu  measuring  value,  we  take  something  wliicli  has  value, 
call  it  a  "dollar,"  and  then  compare,  not  the  thing  itself,  but  the 
value  of  the  dollar,  with  the  value  of  the  thing  we  are  measui-iug, 
and  find  out  how  many  times  the  one  is  contained  iu  the  other. 
The  reader  will  observe  that  we  compare  length  with  length, 
weight  with  weight  and  value  with  value.  He  will  also  observe 
thai  length  weight  and  value  are  the  essential  qualities  or  fea- 
tures of  the  measures  respectively,  and  not  the  particular  material 
of  the  measure  or  standard  in  any  case.  He  will  still  further 
observe  the  analogy  presented  in  these  different  measures,  and 
for  the  moment  it  appears  to  be  perfect. 

Here  is  founded  what  has  been  called  the  "yard  stick  theory" 
of  money,  which  like  the  most  injurious  of  all  fallacies  is  just 
half  a  truth.  We  have  considered  the  analogies,  now  let  us  con- 
template the  conspicuous  wanft  of  analogy  in  three  most  impor- 
tant respects: 

First — Length  and  specific  gravity  are  qualities  of  matter 
which  are  cognizable  by  one  or  more  of  the  five  senses.  Value  is 
not.  We  can  neither  see,  hear,  taste,  feel  nor  smell  it.  It  has  no 
physical  proportions,  neither  form  nor  substance. 

Second — The  first  above  noted  gives  rise  to  the  second  vrant 
of  analogy,  and  that  is  in  the  method  of  applying  the  measure  of 
value  as  compared  to  those  of  weight  and  length.  One  person, 
acting  indepeudentlj%  can  measure  cloth  and  weigh  sugar  but 
cannot  apply  the  measure  of  value.  The  market  price  of  any 
given  commodity  is  the  ratio  of  exchange  between  it  and  the 
money  expressed  in  terms  of  the  latter,  as  "dollar,"  "cents,"  etc.; 
but  that  ratio  is  not  determined  by  any  individual  but  by  the 
concurrent  judgment  of  the  mass  of  traders  in  that  particular 
thing,  both  buyers  and  sellers.  A  single  swallow  does  not  make 
a  spring,  neither  does  a  single  transaction  make  a  market  price. 
So  while  it  takes  at  the  least  two  persons  to  make  a  transaction, 
it  requires  more  yet  to  apply  the  measm-e  of  value  in  that  way 
required  to  establish  a  market  price.  The  judgment  or  opinion 
of  the  mass  of  traders  is  based  upon  tlieir  general  knowledge 
and  experience  of  the  relative  quantities  of  money  seeking  ex- 
change upon  the  one  hand  and  of  the  commodity  upon  the  other, 
and  the  demand  for  each.  As  before  remarked,  money  is  essen- 
tially a  social  instrument.  One  man  alone  would  never  need 
any  money.  Two  men  together  nor  even  three  or  more,  would 
ever    need    or    have    use   for    it.      As    money    is    a    product    of 


PRINCIPLES    OF    MONEY    AND    COINAGE.  39 

association,  all  its  chief  functions  are  those  requiring  the  partici- 
pation of  a  number  of  persons  in  applying  and  administering. 
While  it  is  readily  admitted  that  monetary  science  is  not  one  of 
the  exact  sciences,  yet  all  men  of  large  experience  in  business 
will  testify  to  an  astonishing  precision  in  determining  prices  in 
modern  centers  of  trade.  When  wheat  is  worth  90  cents  per 
bushel  it  will  fluctuate  in  the  chief  markets  by  the  one-eighth  of 
a  cent  a  bushel;  that  is,  by  the  720th  portion  of  its  price,  when 
the  total  price  in  question  is  but  one-fom-th  part  of  the  wage  for 
eight  hours  of  sliilled  labor. 

Third— The  third  sad  lack  of  analogy  is  this:  Length  and 
weight  are  stable  and  comparatively  unchangeable  qualities  of 
matter.  Value  is  a  mercurial  and  ever-shifting  relation  of  things. 
WTiat  a  vast  difference!  Take  a  yardstick  and  measure  off  a 
yard  of  cloth  and  lay  both  away  in  a  secure  place  for  a  fortnight 
or  a  twelvemonth  or  longer,  then  take  them  and  compare  again 
and  5'ou  will  find  them  equal  in  length.  Take  a  dollar  and  go 
into  the  market  and  buy  its  worth  of  the  same  cloth  and  lay 
both  away  for  the  same  length  of  time,  then  take  them  out  and 
go  into  the  market  again  and  ascertain  their  then  relative  value. 
The  chances  are  at  least  ninety-nine  in  one  hundred  that  they 
are  not  now  equivalents.  It  is  probable  that  they  have  not  re- 
mained equivalents  for  any  five  days  together  in  the  whole  time. 
Whether  it  is  the  fault  of  the  dollar  or  the  cloth  is  a  constjint 
cause  of  dispute— a  perennial  quarrel  in  politics.  The  yardstick 
does  not  vary  in  its  length  from  time  to  time.  The  pound  weight 
is  the  same  year  in  and  year  out  and  decade  after  decade.  Not 
so  with  the  value  of  a  dollar,  nor  any  other  piece  of  money  in  the 
known  world.  All  expansions  and  contractions  of  the  money 
volume  affect  the  integrity  of  the  money  measure.  All  expansions 
and  contractions  of  the  numbers  of  people  using  it,  and  their  pro- 
ducts seeking  exchange,  the  money  volume  remaining  the  same, 
have  the  same  effect.  With  yardsticks  and  pound  weights  the 
quality  to  be  determined  is  fixed,  both  in  the  measure  and  the 
thing  to  be  measured.  In  the  case  of  money  it  is  not  a  fixed 
quality  in  either  the  measure  or  the  thing  to  be  measured.  Pound 
weights  and  yardsticks  are  never  subjects  of  contention  in  our 
politics.  The  "money  question,"  like  evil  doing,  is  always  with 
us.  The  foregoing  considerations  abundantly  account  for  it.  It 
is  the  lament  of  economists  that  AA-ith  all  the  progress  made  in 
the  arts  and  inventions,  no  stable  or  fixed  measure  of  values  has 
ever   been   devised.      There   is   no   improvement   to   note   in    this 


40  PRINCIPLES    OP    MONEY    AND    COINAGE. 

important  particular  since  the  earliest  dawn  of  civilization.  At 
the  different  times  when  cattle  or  coon  skins  or  tobacco  were 
money,  there  was  probably  a  better  eciuilibrium  maintained  be- 
tween the  mass  of  money  and  commodities  respectively  than  in 
later  times  with  a  much  more  convenient  money.  To  aggravate 
the  case  greatly  too,  tlie  art  of  manipulating  the  fluctuating 
measure  of  values  is  being  constantly  better  understood  and  more 
practiced  to  subserve  sinister  ends. 

As  a  Legal  Means  of  Payment;  (Legal  Tender),  xnis  third 
function  of  money  is  what  is  called  by  nearly  aU  the  leading 
writers  of  the  world  the  "standard  of  value"  function.  It  is 
clearly  a  blunder— a  misnomer— to  do  so.  The  confusion  and  per- 
plexity that  have  resulted  from  this  almost  universal  error  have 
added  immeasm'ably  to  the  difHculty  of  a  right  understanding  of 
the  mone}'  question.  The  favorite  manner  of  describing  the  princi- 
pal functions  of  money  is  as  follows:  1.  A  medium  of  exchange 
2.  A  measure  of  value;  3.  A  standard  of  value;  and  by  all,  this 
third  function  is  further  defined  as  that  conferred  by  legal  tender 
laws.  A  very  few  of  the  later  writers  came  to  perceive  the 
incongruity  in  the  usual  definition,  but  only  one,  Professor 
Laveleye,  fully  corrected  the  blunder,  and  the  language  employed 
in  the  definition  used  in  this  paper  is  that  of  the  last  named 
authority.  In  a  later  chaptei"  in  this  volume  the  reader  will  dis- 
cover how  some  rather  pretentious  authors  upon  this  subject  have 
been  misled  on  this  important  point. 

The  legal  tender  feature  has  really  less  to  do  with  the  value 
of  money  than  either  of  the  other  chief  uses,  and  has  no  direct 
nor  immediate  connection  whatever  with  the  measuring  of  the 
value  of  either  the  money  itself  or  of  other  things.  Why  then, 
should  it  be  called  the  "standard  of  value"  feature,  since  it  has 
no  quality  of  standard  and  little  or  nothing  to  do  with  value? 

Legal  tender  laws  have  one  object  only— to  define  and  inter- 
pret contracts.  Illustration  No.  1.— If  A,  for  value  received,  gives 
his  note  to  B,  promising  to  pay  at  a  given  time  so  many  "dollars," 
legal  tender  laws  define  and  declare  what  particular  thing  or 
things  are  meant  by  the  word  "dollars"  in  such  a  contract,  and 
the  courts  will  enforce  specific  performance.  Illustration  No.  2.— 
If  individuals  or  coi-porations  become  indebted,  the  one  to  the 
other,  in  the  absence  of  any  specific  contract  as  in  trespass  or 
damage  for  any  one  of  a  thousand  causes,  the  courts  declare  the 
obligation  in  terms  of  "dollars,"  and  as  before  legal  tender  laws 


PRINCIPLES  OF  MONEY  AND  COiNAOE.  41 

tletiue  tlie  word.  A  dollar  whicli  by  law  is  a  legal  tender  will  dis- 
charge auj-  debt,  tliougb  iu  the  meantime  the  dollar  may  have  -^ 
become  \Yorthless. '  Specific  performance  is  the  essence  of  legal 
tender  laws,  and  they  do  not  pm-port  to  guarantee  the  value  of 
money  at  all.  To  illustrate  how  little  legal  tender  alone  may 
have  to  do  with  the  value  of  money,  or  the  burden  of  a  debt, 
consider  our  present  token  silver  dollar.  It  is  a  legal  tender  and 
will  discharge  any  debt  made  or  declared  in  the  simple  term  of  ,-j; 
"dollars."  Yet  being  entirely  subsidiary  to  gold,  the  only  "stand-  '^ 
ard"  coins  in  use  among  us,  the  silver  dollar  possesses  the  value 
of  the  gold  dollar;  is  measured  by  the  gold  dollar;  exchanges 
commodities  at  gold  prices,  and  pays  the  value  of  gold  in  the 
discharge  of  debts.  The  same  is  true  of  greenback  dollars  for 
they  are  also  a  legal  tender.  If  gold  rises  in  value  under  our 
present  money  system,  our  silver  and  greenback  dollars  do  the 
same.  If  gold  should  fall,  they  fall.  National  bank  notes  and 
other  forms  of  paper  money  in  use  by  us,  and  which  are  not  a 
legal  tender,  have  just  as  much  to  do  in  determining  prices  iu  the 
markets  as  does  the  silver  dollar  and  the  influence  of  all  in  that 
direction  is  exerted  in  subordination  to  the  standard  gold  coins, 
for  reasons  which  will  appear  hereafter.  As  payment  may  legally 
be  made  with  any  legal  tender  dollar,  without  regard  to  its  value 
or  purclaasing  power,  it  follows  of  course  that  the  legal  tender 
feature  constitutes  no  standard  of  value;  and  when  we  consider 
that  the  value  of  siich  a  dollar  at  any  gven  time  is  wholly  de- 
pendent, in  a  primary  way,  upon  the  value  of  some  other  dollar, 
it  adds  emphasis  to  the  fact  that  it  constitutes  no  "standard." 

Other  Functions.  Money  is  termed  an  "universal  equivalent." 
a  "store  of  value,"  etc.,  etc.,  but  all  other  uses  of  money  whatso- 
ever are  found  to  be  incidental  and  subordinate  to  the  three  chief 
uses  analyzed  in  this  paper. 

Standard.  Other  and  various  uses  of  this  word  are  often 
made  in  conuecton  with  this  siibject.  The  United  States  statutes 
prescribe  that  all  coins,  both  standard  and  token,  shall  be  of  a 
certain  weight  of  metal,  and  such  is  termed  the  "standard"  weight. 
The  act  of  1878  providing  for  the  coinage  of  the  present  silver 
dollar  termed  it  the  "standard"  dollar.  It  is  hard  to  account  for 
this  unless  upon  the  presumption  that  legal  tender  alone  made 
a  standard  of  value.  It  is  more  prol>able  however,  that  as  the 
bill  orignally  provided  for  the  free  coinage  of  the  silver  dollar, 
thus  making  it  in  fact  a  standard  dollar,    and    that    when    that 


42  PRINCIPLES    OF    MONEY    AND    COINAGE. 

feature  of  the  measure  was  stricken  out  the  title  of  the  bill  was 
not  amended  to  correspond.  So  in  all  treasury  reports  and  offi- 
cial documents  the  Bland  dollar  is  called  the  standard  silver  dol- 
lar, when  it  is  in  no  important  or  scientific  sense  a  standard  of 
or  for  anything.  The  word  is  also  applied  to  the  metal  out  of 
which  standard  coins  are  made,  when  alloyed  to  the  degree  re- 
quired by  the  laws.  In  the  United  States  gold  and  silver  bullion 
when  alloyed  to  the  extent  of  one-tenth  as  required  by  statute 
for  the  purposes  of  coinage  are  termed  "standard  bullion,"  as 
distinguished  from  pure  metal,  which  is  called  "fine." 

Interest  Upon  Money.  The  rate  of  hire  of  money,  interest, 
usury  (all  syuouynious)  is  a  mere  incident  of  its  use  and  not  a 
function,  nor  having  any  necessary  connection  with  its  most 
beneficial  offices.  If  money  bore  no  interest  whatever  it  would 
still  answer  every  salutary  purpose  of  its  selection  or  creation. 
.Money  is  a  social  instrumentality  and  a  public  necessity;  and  it 
is  unreasonable  and  illogical  that  its  quantitj^  character  and  con- 
trol should  be  placed  or  permitted  to  be  in  the  hands  of  those 
who  profit  only  by  a  perverted  use  of  it,  whether  it  be  the 
metallic  or  paper  money. 


PRINCIPLES    OF    MONEY    AND    COINAGE.  43 


FIFTH  PAPER. 


THE   STANDARD   METAL  MONEY   SYSTEM. 

Its  Evolution.  All  the  commercial  nations  of  the  world  have 
in  all  essentials  the  same  sj'stem  of  money  at  the  present  time. 
They  differ  only  in  the  metal  used  as  the  standard  and  in  the 
less  important  details.  This  system  so  generally  in  vogue  may 
be  properly  termed  The  Standard  Metal  Money  System  and  con- 
sists of  standard  metal  coins  supplemented  by  token  coins  and 
a  great  variety  of  paper  notes  and  bills.  Other  systems  are  possi- 
ble. Some  other  system  may  be  better;  but  the  object  of  the 
writer  at  the  present  time  is  to  deal  with  the  practical  and  pres- 
ent facts  of  the  money  question  and  not  to  propound  new  theories. 

At  a  very  early  stage  in  the  process  of  evolution  of  human 
society,  gold  and  silver  were  discovered  and  some  use  was  made 
of  them.  As  they  existed  in  limited  quantities  and  cost  labor 
to  produce  in  usable  form,  they  soon  acquired  a  value.  As  people 
increased  faster  than  the  metals  could  be  produced,  and  as  their 
brightness,  dm-ability,  malleability,  ductility,  divisibility  and 
other  pi'operties  became  known  and  appreciated,  they  came  to  be 
more  generally  desired  and  consequently  their  value  grew.  At  a 
later  stage  it  was  discovered  that  a  comparatively  small  piece  of 
either  gold  or  silver  was  considered  the  equivalent  in  value  of 
other  quite  large  and  unwieldy  possessions. 

At  a  time  in  the  world's  history  when  rights  of  propertj'^  were 
not  so  well  protected  as  now— when  violence  reigned  and  might 
was  the  only  arbiter  of  rights— it  was  often  very  convenient  for 
a  rich  man  to  be  able  to  convert  his  herds  and  lands  and  slaves 
into  a  form  of  property  that  he  could  hide  from  the  bandit  or  a 
robber  king.  Hence  he  wanted  gold  or  silver  or  both  for  that 
reason.    They  answered  his  purpose  well. 

It  is  easy  to  account  for  the  use  of  gold  and  silver  as  medi- 
ums of  exchange.    At  first  they  were  handled  in  pieces  of  varied 


44  PRINCIPLES    OF    MONEY    AND    COINAGE. 

sizes  and  shapes  aiul  their  values  estimated  by  their  weight. 
After  awhile  for  the  sake  of  couveuieiice,  the  metals  were  molded 
into  pieces  of  iiniform  size.  Tlieii  in  course  of  time  these  pieces 
were  s;iven  names.  Thus  may  be  traced  the  origin  of  our  word 
dollar.  Joachim  owned  a  silver  mine  in  Bohemia.  The  locality 
was  known  as  Joachim's-dahl  (dale).  The  miner  of  Colorado  would 
have  rendered  it  "Jake's  gulch."  Joachim  sold  his  silver  in  pieces 
of  uniform  size  weight  and  appearance,  and  these  pieces  came 
to  be  known  as  Joachim's-dahlers.  Then  as  dahlers  merely,  and 
finally  was  evolved  our  word  "dollar." 

As  both  silver  and  gold  can  be  alloyed  to  a  considerable  degree 
without  much  altering  the  appearance  of  the  metals,  and  as  it 
was  very  inconvenient  for  tradesmen  and  others  to  carry  scales 
with  them  to  weigh  the  metals  as  they  might  be  offered  in  pay- 
ments and  in  exchange,  it  became  necessary  to  have  some  gen- 
eral and  public  certifier  to  the  fineness  of  metal  and  the  weight 
of  any  particular  piece.  It  was  further  readily  observed  to  be  a 
great  convenience  to  have  the  metals  divided  into  pieces  of  differ- 
ent sizes  and  weights  so  as  to  facilitate  exchanges  of  things  of 
very  small  value  as  well  as  those  of  greater. 

One  thing  more  was  needed  to  complete  the  convenience  of 
these  pieces  for  purposes  of  exchange,  and  that  was  that  the 
pieces  of  different  sizes  should  each  have  a  name  so  that  people 
might  become  accustomed  to  it  and  readily  undex'stand  what  was 
meant  whenever  that  name  was  used. 

Now  in  order  that  this  certification  of  fineness  and  weight 
and  the  uniformity  of  names  should  be  preserved  and  all  com- 
mand the  confidence  of  the  people,  it  was  necessary  that  it  be 
done  by  one  person,  a  competent  and  responsible  person,  and 
also  one  clothed  with  the  necessary  authority  and  power  to  pre- 
vent the  introduction  of  false  or  debased  pieces  of  the  same  name 
by  dishonest  persons  to  cheat  the  people.  Hence  it  could  be  done 
by  no  one  so  appropriately  as  by  the  king.  He  only  had  the  requi- 
site power  to  enforce  uniformity  and  prevent  counterfeiting.  At 
any  rate  he  claimed  it  as  his  prerogative  as  the  father  of  his 
people,  according  to  the  patriarchal  theory  from  which  all  human 
government  is  derived.  He  was  all  the  more  eager  to  do  so  be- 
cause he  saw  in  it  a  possible  source  of  revenue. 

So  the  king  established  his  mint  with  the  necessary  ma- 
chinery, which  centuries  ago  was  very  crude,  and  invited  the 
people  to  bring  him  their  gold  and  silver  to  be  coined,  and  for 


PRINCIPLES    OF    MONEY    AND    COINAGE.  45 

this  service  lie  took,  saj'  one  piece  out  of  every  hundred  as  his 
"seigniorage."  This  after  paying  ror  the  alloy  (which  was  soon 
discovered  to  be  necessary  to  harden  the  metal  and  prevent  it 
wearing-  so  fast)  and  paying  the  expenses  of  the  mint,  consti- 
tuted his  revenue  from  that  source.  And  thus  was  instituted  free 
coinage,  and  the  fabrication  of  what  is  known  as  "standard" 
metal  money.  The  king  stamped  his  own  image  upon  the  pieces 
to  gratify  his  vanity  perhaps,  or  possibly  in  the  hope  that  through 
this  device  his  people  might  grow  to  love  him  as  much  as  he 
knew  they  loved  the  money.  In  addition  to  this  the  names  of 
the  pieces  were  stamped  upon  them,  the  date  and  the  name  of 
the  kingdom  or  empire.  This  process  of  coinage  is  now  common  to 
all  the  commercial  nations  of  the  present  day  which  have  mints. 
Some  of  the  less  impontant  countries  have  no  mints,  but  use  the 
standard  coins  of  other  countries  which  coins  are  recognized  by 
their  laws  and  customs. 

The  generation  which  firsit  witnessed  the  institution  of  what 
we  may  term  this  national  system  of  coinage  were  accustomed 
to  handling  tlie  metals  by  weiglit  and  knew  the  values  of  com- 
modities in  their  rnarlcets  as  expressed  by  different  weights  of 
gold  or  silver,  and  in  that  way  only.  But  when  this  system  of 
coinage  was  besiiu  proclamation  was  made  of  the  weight  and 
fineness  of  metal  in  each  coin  of  a  particular  name,  and  ex- 
changes were  soon  adjusted  to  the  uniform  coin  system.  Illus- 
tration.— If  in  any  market  a  given  weight  of  barley  was  being 
exchanged  for  a  certain  weight  of  silver,  and  when  the  coins 
appeared  it  became  known  that  five  pieces  of  a  certain  name  con- 
tained that  same  weight  of  silver,  then  the  price  of  the  barley 
at  once  became  five  such  pieces  by  whatever  name  they  had. 

Probably  the  next  succeeding  generation  lost  all  Icuowledge 
or  thought  of  the  weight  of  metal  in  the  coins  because  of  the 
acquired  habit  of  reckoning  all  transactions  merely  by  tlie  names 
of  money  pieces,  and  at  the  present  time  not  one  person  in  ten 
■/jousand  the  country  over  can  tell  the  precise  weight  of  pure 
gold  metal  in  the  standard  gold  dollar.  A  uirill  fewer  number 
realize  the  fact  that  in  every  transaction  of  t^^  amount  of  one 
dollar  they  are  practically  eitlier  buying  or  selling  23.22  grains 
of  fine  gold,  although  the  money  handled  at  the  moment,  if  any, 
may  be  either  silver  or  some  form  of  paper. 

Free  Coinage.  It  is  verj'  important  to  carefully  note  a  few 
features  of  free  coinage. 


4t;  PRINCIPLES  OF  MONEY  AND  COINAGE. 

First.— The  -word  'Iree,"  as  used  in  this  connection  does  not 
necessarily  mean  without  charge,  but  rather  without  limit  as  to 
quantity  or  ownership  of  the  metal.  The  privilege  of  having 
metal  coined  is  open  to  everybody  and  to  all  the  metal.  The  value 
of  the  metal  has  been  determined  before-hand  by  its  quantity 
and  the  demand  for  it,  and  its  coinage  does  not  pm'port  to  affect 
its  value  at  all,  and  cannot  do  so,  except  as  it  may  extend  its  uses 
and  thus  increase  the  demand  for  it.  When  there  is  no  charge 
for  the  service  or  alloy  at  a  free  coinage  mint,  then  it  is  called 
"free  and  gratuitous  coinage,"  and  this  is  not  tautology.  In 
recent  times  charges  for  coining  the  standard  metal  have  been  re- 
duced to,  or  almost  to,  the  gratuitous  point  for  reasons  which  will 
be  noted  when  I  come  to  speak  of  the  Par  of  Exchange. 

Second.— The  value  of  standard  coins  is  always  and  every- 
AA'here  the  value  of  the  fine  metal  they  contain,  or  as  some  choose 
to  term  it,  their  "bullion  value."  No  variation  or  diftereuce  of 
value  between  coined  and  uncoined  metal  can  possibly  occur,  ex- 
cept to  the  extent  of  the  mint  charges  or  the  cost  of  getting  the 
bullion  to  it.  This  parity  of  value  between  coins  and  bvillion  is 
the  distinguishing  characteristic  of  standard  metal  money,  and 
this  parity  or  equality  of  value  cannot  be  maintained  by  any  other 
means  than  by  free  and  gratuitous  coinage.  If  the  mint  makes 
any  charge  whatever  for  coinage,  then  the  coins  will  have  just 
that  much  greater  value  as  they  come  from  the  mint  than  the 
bullion  as  it  goes  in  because  the  coins  have  uses  which  the  bul- 
lion has  not  and  this  obstacle  of  a  change  stands  between  the 
two. 

Third— Free  coinage  is  in  no  sense  a  gratuity  or  special  favor 
bestowed  upon  the  original  owner  of  the  metal.  As  we  have 
seen,  it  was  first  adopted  wholly  as  a  matter  of  convenience  to 
the  public,  and  it  still  remains  so.  The  gold  and  silver  miner 
happens  to  be  the  producer  of  the  money  commodity;  but  the 
fact  that  their  products  are  the  ones  used  for  money  does  not 
deprive  them  of  their  commodity  nature.  Both  gold  and  silver, 
like  wheat  and  cotton  and  iron,  are  alike  subject  to  thait  great 
law  of  demand  and  supply.  Free  coinage  is  no  special  protec- 
tion to  them,  for  with  it  they  can  only  obtain  in  exchange  for 
the  metals  what  they  will  bring  in  a  free  open  and  world  wide 
market. 

Fourth— A  metal  which  is  accorded  free  coinage  into  money 
pieces  is  called  a  "money  metal."  The  reason  it  is  so  called  is 
because  the  bullion  of  that  metal  can  be  used  to  better  advantage 


PRINCIPLES    OF    MONEY    AND    COINAGE.  47 

than  the  coin  in  the  international  exchanges  and  settlement  of 
balances;  and  it  maj-  be  and  often  is  used  in  domestic  transac- 
tions as  the  equivalent  of  coins.  Another  fact  follows  upon  this 
and  makes  it  truly  a  '"money  metal"  because  the  supply  of  money 
in  the  commercial  sense  consists  of  the  combined  mass  of  both 
bullion  and  coins.  The  bullion  is  potential  monej'  because  it 
may  be  almost  instantly  converted  into  coins  or  their  current 
equivalents. 

In  sketching  the  evolution  of  standard  money  in  this  number 
I  have  treated  both  gold  and  silver  as  alike  subjects  of  that  pro- 
cess. The  historical  fact  is  however,  that  silver  much  more  than 
gold  was  the  metal  concerned,  for  all  the  older  nations  used  silver 
almost  exclusively  in  their  earlier  periods  and  a  very  large  ma- 
jority of  the  people  of  the  world  still  use  it  as  their  only  standard 
money. 

It  is  quite  important  for  the  sake  of  clearness  in  discussion 
of  this  subject  to  note  that  only  the  metal  which  is  accorded  free 
coinage  by  any  nation  is  a  "money  metal,"  and  that  the  metal 
which  is  coined  free  in  any  country  constitutes  the  metallic  stand- 
ard for  that  people. 

Monetization  and  Demonetization.  To  monetize  a  metal  is 
to  admit  it  to  free  coinage  at  a  mint.  To  demonetize  a  metal  is 
to  refuse  free  coinage  to  a  metal  which  has  theretofore  had  that 
privilege.  And  nothing  is  free  coinage  which  does  not  compre- 
hend all  the  metal  in  the  world  if  its  owners  see  fit  to  bring  it  to 
the  mint,  for  its  object  is  to  merge  the  value  of  the  coin  into  that 
of  the  mass  of  the  metal  of  which  it  is  made — make  them  one, 
weight  for  weight. 


PRINCIPLES    OF    MONEY    AND    COINAGE.  49 


SIXTH   PAPER. 


ABOUT  TOKEN  MONEY. 

There  are  only  two  kinds  of  money,  primarily  considered,  in 
the  standard  metal  money  system.  These  are  standard  money  and 
supplementary  money.  The  first  of  these  has  been  already  de- 
scribed and  defined.  The  second  embraces  every  other  kind  used 
concurrently  with  the  standard.  Illustrated  by  reference  to  the 
moneys  now  in  use  in  the  United  States,  the  gold  coins  alone  are 
standard,  while  all  silver  coins,  greenbacks,  treasury  notes,  bank 
notes,  certificates  of  all  kinds  and  nickel  and  copper  coins  consti- 
tute the  supplementary  money. 

It  would  perhaps  be  interesting  to  some  readers  to  have  a 
history  of  the  evolution  of  these  various  forms  of  supplementary 
money,  but  it  would  be  voluminous  and  is  not  essential  to  the 
present  pm'pose.  We  can  rest  assured  however,  that  all  forms 
of  it  and  particularly  the  paper,  really  sprang  from  that  prolific 
mother  of  all  inventions  human  necessity.  Two  facts  are  how 
ever  worth  noting.  First,  that  it  would  in  this  day  and  age  be 
utterly  impossible  to  conduct  the  exchanges  of  the  world  by  the 
use  of  standard  money  alone.  Second,  that  the  large  volume  of 
supplementary  money  in  use  has  had  an  important  effect  in  modi- 
fying the  value  of  the  standard  coins  and  thus  made  more  stable 
the  ultimate  measure  of  values.  If  all  forms  of  supplementary 
money  were  withdrawn  it  would  precipitate  revolution  upon  every 
civilized  country  of  the  world  through  the  increased  value  of 
the  standard  money  and  the  consequent  shrinkage  of  prices. 

Token  Money.     All  coins  not  made  by  free  coinage  are  prop- 
erly designated  as  "tokens,"  and  this  name  applies  to  all  present 


'A 


50  PRINCIPLES    OF    MONEY    AND    COINAGE. 

United  States  coins  except  gold.  It  is  also  by  some  applied  to  all 
forms  of  paper  money  as  well,  and  so  used  includes  all  that  I  have 
above  comprehended  by  the  word  supplementary. 

The  leading  characteristic  of  token  coins  is  the  disparity  of 
value  between  the  coins  as  tiiey  pass  from  hand  to  hand  in  their 
use  as  money,  and  that  of  ■their  material  when  in  some  other 
form.  Consider  the  various  token  coins  in  common  use  amongst 
us.  Our  silver  dollar  maintains  an  equal  value  with  the  gold 
dollar  in  all  domestic  transactions,  while  the  value  of  its  material 
h:is  ranged  from  about  94  cents  down  to  53  cents  compared  to 
the  same  gold  dollar.  The  same  is  true  but  to  a  greater  extent, 
of  the  minor  silver  coins  such  as  half  dollars  quarters  and  dimes. 
When  we  turn  to  our  nickel  5-cent  pieces  the  difference  is  stiU 
greater.  When  measm-ed  against  the  standard  gold  dollar,  the 
nickel  metal  is,  I  think,  worth  about  40  cents  a  pound.  When  a 
pound  of  it  is  made  into  5-ceut  pieces  they  will  exchange  even 
in  any  of  our  domestic  markets  for  about  $5.00  in  gold.  A  similar 
difference  is  discovered  In  the  copper  1-cent  pieces.  It  takes  about 
150  of  them  to  weigh  a  pound,  and  that  number  have  the  exact 
value  of  $1.50  in  gold,  while  a  pound  of  copper  metal  is  only 
worth  about  13  cents  in  gold. 

The  foregoing  reference  to  5-cent  nickel  pieces  is  based  upon 
the  presumption  that  they  are  pure  metal,  while  the  fact  is  I 
believe,  that  they  are  three-fourths  copper. 

Here  then  we  observe  different  token  coins  ranging  in  their 
"bullion  value,"  so  called  all  the  way  from  about  8  cents  to  above 
94  cents  as  compared  to  the  standard  gold  dollar,  and  yet  having 
a  commercial  value  equal  at  all  times  and  everywhere  within  our 
borders  to  the  gold  dollar.  This  is  a  point  in  the  subject  that 
begets  much  perplexity  in  the  minds  of  many  people  and  deserves 
some  careful  attention  and  explanation  so,  if  possible  the  exact 
facts  and  reasons  for  this  state  of  things  may  become  apparent. 

Let  us  inquire: 

First— Is  it  necessary  to  use  a  costly  or  valuable  material  for 
the  making  of  token  coins?  It  would  seem  not.  The  value  of  the 
material  of  a  token  seems  to  have  no  connection  with  nor  influ- 
ence upon  its  value  as  a  piece  of  money.  As  the  value  of  the 
material  ia  our  silver  dollar  has  varied  all  the  way  from  53  cents 
up  to  94  cents  in  the  last  fourteen  years,  without  producing  the 
slightest  effect  upon  the  current  exchange  value  of  the  coin,  there 


PRINCIPLES    OP    MONEY    AND    COINAGE.  51 

is  certainly  no  immediate  connection  between  the  two.  Likewise 
we  observe  that  liowever  nickel  and  copper  may  fluctuate  in  the 
market,  those  fluctuations  produce  no  effect  whatever  upon  the 
value  of  S-cenl;  pieces  or  1-cent  pieces.  The  oflScers  of  our  govern- 
ment have  been  able  at  aU  times  within  the  last  fourteen  years 
to  buy  with  a  silver  dollar  much  more  metal  than  was  required  to 
make  a  silver  dollar.  And  with  nickel  at  40  cents  per  pound 
they  can  buy  for  8  nickels  enough  metal  to  make  120  nickels.  As 
it  appears  there  is  no  connection,  near  or  remote,  between  the 
value  of  the  material  in  a  token  and  the  current  exchange  value 
of  the  coin  as  a  piece  of  money,  why  should  the  government  (the 
people)  use  a  costly  material  for  such  purposes?  Is  it  not  a  need- 
less waste?  It  surely  is,  and  hence  the  conclusion  to  which  all 
thoughtful  people  have  come  witli  reference  to  our  present  system 
of  coinage  of  silver  dollars.  If  there  is  no  sufficient  reason  why 
silver  should  be  coined  into  standard  money  (the  result  of  free 
coinage),  there  is  no  sufficient  reason  why  it  should  be  coined  at 
aU.  The  question  which  arises  in  choosing  the  material  for  token 
coinage  is  one  of  convenience  only  and  not  one  of  value. 

Second— Is  the  value  of  a  token  coin  as  money  a  different  kind 
of  value  than  that  which  pertains  to  its  material  when  devoted 
to  other  uses?  Or,  in  other  words,  is  there  any  justification  or 
necessity  for  the  use  of  the  word  "intrinsic"  in  describing  the 
value  of  the  copper  in  a  cent  piece  to  distinguish  it  from  the 
value  the  cent  has  as  money?  It  appears  not.  As  we  have  here- 
tofore observed,  value  grows  out  of  use  combined  with  a  limita- 
tion of  quantity,  and  a  1-cent  piece  has  a  value  proportioned  to  its 
uses  as  money,  while  the  mass  of  copper  metal  has  a  vahie  pro- 
portionate to  its  uses  in  a  thousand  ways  in  the  mechanic  arts. 
But  it  is  the  same  kind  of  value  in  each  case,  differing  only  in 
degree. 

The  Value  of  Token  Money.  I  have  heretofore  referred  to 
the  rather  general  belief  that  the  stamp  of  a  mint  or  printing 
press  could  distinctly  create  value,  and  the  reasons  for  such  belief. 
But  as  a  result  of  the  most  acute  investigation  possible  there  is 
but  one  source  or  cause  of  commercial  value,  we  must  look  a 
little  below  mere  surface  appearances  for  the  true  explanation  of 
the  value  of  token  coins. 

We  have  only  to  refer  to  the  formula  of  value  creation  in  one 
of  the  earlier  numbers  of  this  series  of  papers  to  account  for  the 


OJ. 


PRINCIFLES  OF  MONEY  AND  COINAGE. 


value  of  token  coins,  viz.:  Use,  coupled  with  limitation  of  supply. 
The  value  of  a  token  is  referable  to  precisely  the  same  cause  as 
the  value  of  gold,  silver,  iron,  wheat,  corn,  wool  or  cloth,  or  any 
other  of  the  ten  thousand  commodities  of  the  markets.  With  all 
these  other  things  the  limit  of  supply  is  the  ability  or  willingness 
of  men  to  dig,  smelt,  cultivate,  harvest,  shear  and  weave,  or  the 
capacity  of  the  earth  to  yield.  It  is  what  may  be  termed  a  nat- 
ural limitation.  As  respects  token  coins  it  is  an  artificial  or 
legislative  limitation. 

As  to  the  other  term  of  the  equation  of  value,  use,  it  is  created 
and  enforced  by  the  laws,  customs,  habits,  convenience  and  neces- 
sities of  modern  and  civilized  commerce.  Simply  stated,  it  is  the 
need  of  money  which  begets  its  use.  Money  being  a  social  in- 
strument, it  is  properly  furnished  by  society,  which  in  its  organ- 
ized capacity,  is  the  government.  As  the  government  properly 
claims  the  exclusive  right  and  power  to  make  or  coin  money,  and 
must  do  so  with  regard  to  token  money  because  of  the  necessity 
of  enforcing  a  limitation  of  quantity,  it  compels  the  use  of  token 
money  very  effectively  in  a  negative  way,  by  simply  fm'nishing 
no  other  kind  adapted  to  the  small  transactions  of  trade.  The 
government  further  induces,  fortifies  and  guarantees  the  use  of 
token  money,  by  making  it  a  legal  tender  to  itself  in  payment  of 
dues  and  postal  charges,  in  sums  proportioned  to  its  total  volume 
amongst  the  people.  Added  to  this  is  the  guaranty  of  use  and 
a  protection  in  the  use,  by  means  of  laws  making  it  a  legal  tender 
up  to  a  certain  amount  between  individuals. 

Legal  tender  laws  are  a  powerful  factor  in  creating  and  sus- 
taining the  uses  of  monej^  upon  which  depends  its  value,  and  es- 
pecially so  of  token  money.  A  citizen  knows  that  if  he  accepts 
a  token  coin  for  his  products  or  services,  he  can  dispose  of  it  in 
the  payment  of  a  debt  or  taxes  without  loss.  What  one  citizen 
can  do  another  can  do,  and  thus  the  universal  and  voluntary  ac- 
ceptance and  use  of  token  coins  within  the  jurisdiction  of  the 
government  instituting  them. 

The  parity  or  equality  of  value  of  token  and  standard  coins 
within  the  jurisdiction  of  the  government  is  accounted  for  in  the 
equivalence  of  use.  If  ten  dollars  of  token  coins  will  discharge  a 
debt  as  effectually  as  a  ten-dollar  gold  piece,  it  has  the  same  uses 
to  that  extent;  so  that  if  the  volume  of  the  tokens  be  rigidly 
limited  to  a  definite  total  amount  proportioned  to  the  total  use 
and  need  for  them,  there  is  no  scientific  reason  why  they  should 


PRINCIPLES    OF    MONEY    AND    COINAGE.  53 

not  have  an  equal  value  v\-ith  the  standard  coins.  As  before  sug- 
gested in  these  papers,  the  value  of  a  standard  coin  arises  out  of, 
and  is  proportioned  to  the  world  wide  uses,  as  compared  to  the 
world  wide  supply  of  that  particular  metal;  so  the  value  of  token 
coins  arises  from  the  national  needs  and  uses  as  compared  to  the 
national  supply. 

Another  Theory.  Another  method  of  accounting  for  the  value 
of  token  money,  and  the  one  of  more  general  acceptance  among 
the  people  perhaps  because  it  is  more  generally  asserted,  is  Avhat 
may  be  termed  the  specific  redemption  theory.  It  is  alleged  that 
token  coins  depend  entirely  for  their  value  upon  the  promise  and 
provision  made  by  the  government  for  tlieir  redemption  in  stated 
sums,  in  standard  money.  This  theory  might  continue  to  meet 
general  acceptance  but  for  the  reason  that  it  is  in  collision  with 
a  stupendous  fact  of  experience.  The  present  silver  dollar  is  a 
token  coin  and  exists  and  circulates  in  large  volume,  has  done  so 
for  fifteen  years,  and  during  all  tliat  time  at  an  unerring  par  with 
the  standard  gold  coins  and  there  is  not  now  and  never  has  been 
any  promise  or  provision  of  law  for  its  redemption  in  any  other 
kind  of  money.  AVhen  theory  and  fact  contradict  each  other  in  so 
conspicuous  a  manner,  theory  must  give  way. 

Paper  Tokens.  If  paper  notes,  or  promises  to  pay,  issued  or 
guaranteed  by  the  national  government,  be  considered  a  part  of 
the  token  money  of  the  country,  their  value  can  be  accounted  for 
more  reasonably  upon  the  groimds  first  above'  outlined,  than  be- 
cause of  the  hope  or  promise  of  specific  redemption  as  so  gen- 
erally asserted.  The  fact  that  an  irredeemable  paper  token  may 
become  as  valuable  as  any  standard  coin  is  conceded  by  the  lead- 
ing economists  of  the  world.  Their  value  is  simply  a  result 
depending  upon  the  willingness  of  the  people  to  use  them  and 
the  volume  of  the  supply. 

Counterfeiting.  A  money  coin  made  by  anyone  or  anywhere 
except  by  an  autliorized  othcer  of  the  government  at  an  United 
States  mint  is  a  counterfeit,  though  it  should  contain  more  pure 
metal  than  the  genuine,  if  that  were  probable.  With  respect  to 
standard  coins,  however  the  real  object  of  the  statute  against 
counterfeiting  is  to  prevent  the  people  from  being  cheated  by  the 
circulation  of  coins  having  the  appearance  of  tlie  genuine,  but 
really  composed  of  some  cheaper  material.  With  respect  to  token 
coinage  it  is  for  a  different  purpose.  First,  it  prevents  all  inter- 
ference with  the  right  and  duty  of  the  government  to  rigidly  regu- 


54  PRINCIPLiES    OF    MONEY    AND    COINAGE. 

late  the  supply  of  such  coins,  a  thing  essential  to  the  preservation 
of  their  value  in  the  hands  of  the  people;  and  secondly,  it  pre- 
serves to  the  public  treasury,  where  it  properly  belongs,  the  profits 
arising  ft'om  such  coinage. 


PRINCIPLES    OF    MONEY    AND    COINAGE.  55 


SEVENTH  PAPER. 


FURTHER   OBSERVATIONS   UPON   STANDARD   COIN 

MONEY. 

The  Pivotal  Point.  An  effort  was  made  in  the  last  two  num- 
bers to  make  clear  the  distinction  between  standard  and  token 
coins.  It  is  a  very  important  distinction  and  one  arising  entirely 
out  of  the  manner  in  which  they  are  made.  Free  coinage  makes 
the  first,  limited  coinage  the  latter.  The  prime  object  of  free 
coinage  is  to  preserve  the  parity  or  equality  in  value  between 
coins  and  bullion,  and  not  in  any  sense  to  confer  a  favor  upon  the 
owners  of  the  metal.  It  is  not  only  essential  to  this  parity  that  the 
process  of  coinage  be  substantially  without  expense  to  the  buUion 
owner  but  there  must  be  no  limit  whatever  to  the  quantity  of  bul- 
lion that  may  be  coined  if  offered.  As  there  is  a  par  of  value  be- 
tween standard  coins  and  bullion  of  the  same  metal,  then  it  fol- 
lows of  course  that  there  is  no  profit  to  the  bullion  owner  in  hav- 
ing his  metal  coined. 

If  the  admission  of  a  metal  to  the  mint  for  free  coinage,  which 
has  heretofore  been  denied  that  privilege,  causes  an  appreciation 
in  the  value  of  the  metal,  all  the  existing  stock  of  that  metal 
everywhere  must  participate  in  the  rise  to  the  some  extent,  bar- 
ring only  the  cost  of  transportation  to  the  open  mint.  If  silver 
should  now  be  admitted  to  our  mints  for  free  coinage,  after  hav- 
ing been  denied  that  privilege  for  the  period  of  about  nineteen 
years,  it  would  increase  the  value  of  the  metal  just  to  the  extent 
that  such  coinage  created  new  and  additional  uses  for  the  metal 
and  thus  increased  the  demand  for  it,  and  no  more.  And  by 
whatever  degree  it  increased  the  exchange  value  of  United  States 
silver  bullion,  it  would  increase  the  value  of  the  metal  evei-y where 
else. 

This  is  tlio  tlieory  of  the  case,  and  I  can  conceive  of  no  con- 
tingency in  the  practical  operations  of  commerce  that  would  cause 
anv  serious  deviation  from  this  law  of  value. 


56  PRINCIPLES    OF    MONEY    AND    COINAGE. 

We  cuu  liud  contirmatiou  of  this  view  of  the  case  by  con- 
sidering the  status  of  our  gold  coins  in  all  possible  contingencies. 
They  are  standard,  and  at  present  our  only  standard  coins,  be- 
cause the  only  ones  made  by  free  coinage.  Put  a  20-dollar  gold 
piece  into  the  melting  pot  and  convert  it  into  a  nugget  and  you 
have  lost  nothing  of  value  by  that  operation,  for  the  mint  will 
make  it  again  into  a  20-dollar  gold  piece  without  charge.  Carry 
it  in  your  pocket  to  England.  It  will  not  be  current  there  as 
money  because  the  common  run  of  people  there  do  not  recognize 
it  by  its  name  nor  know  the  amount  of  gold  in  it  nor  its  fineness. 
But  hand  it  to  the  Bank  of  England,  the  agent  of  the  English 
mint  and  it  will  be  coined  into  sovereigns  for  you  free  of  charge,' 
and  you  will  discover  that  you  have  lost  nothing  whatever  of 
value  in  the  change. 

Bring  the  sovereigns  back  to  the  United  States  and  you  will 
find  that  they  are  not  cui'rent  money,  because  not  one  person  in 
one  hundred  knows  what  a  sovereign  is,  how  much  gold  it  con- 
tains, what  the  fineness  of  tlie  metal,  nor  indeed  whether  it  be 
gold  or  some  base  imitation.  But  hand  your  sovereigns  in  at  the 
United  States  mint  and  they  will  be  changed  again  into  a  $20-gold 
piece,  the  identical  thing  you  started  with.  Not  an  iota  of  value 
has  been  either  gained  or  lost. 

If  you  had  extended  yom'  travels  and  taken  the  sovereigns  to 
France  and  had  them  converted  into  50-franc  pieces,  and  taken 
those  to  Germany  and  had  them  converted  into  20-mark  pieces  and 
brought  those  back  to  the  United  States  the  result  would  be  the 
same. 

The  fact  is  then  clearly  apparent  that  standard  coins  are  In 
their  essential  of  value  nothing  but  pieces  of  buUion. 

The  fact  is  equally  apparent  too,  that  in  the  metal  money  sys- 
tem the  value  of  all  the  money  in  use  is  by  and  through  the  stand- 
ard coins,  anchored  to  the  mass  of  metal  of  which  they  are  com- 
posed. The  value  of  the  standard  coins  rises  and  falls,  ebbs  and 
flows  with  the  vicissitudes  of  the  supply  and  demand  for  that 
metal  in  the  markets  of  the  world,  and  the  value  of  all  token  and 
supplementary  money  rises  and  falls  with  that  of  the  standard. 
The  standard  coin  is  thus  the  pivotal  point  of  the  metal  money 
system. 

The  Theory  of  "The  Dump."  A  year  or  two  ago,  in  the  earlier 
stages  of  the  present  discussion  of  the  coinage  question,  it  was 
widely  and  frequently  charged   that  if  the  mints  of  the  United 


PRINCIPLES    OF    MONEY    AND    COINAGE.  57 

States  were  opened  to  the  free  coinage  of  silver  doUars  as  former- 
ly, it  would  be  the  signal  for  the  starting  of  cargoes  of  silver  from 
all  parts  of  the  world  to  be  "dumped"  upon  our  mints  for  the 
profit  it  would  afford  to  the  owners  of  the  foreign  silver.  It  is  a 
sign  of  progress  made  in  the  knowledge  of  this  subject  that  but 
little  if  any  reference  to  the  dumping  business  can  be  found  in 
the  discussions  of  the  year  1893.  There  is  never  any  profit  to  be 
made  in  carrying  metal  to  a  free  mint,  nor  in  carrying  a  money 
metal  from  one  nation  to  another.  The  Mexican  mints  are  free  to 
silver;  the  Indian  mints  were  so  up  to  June  1893,  and  yet  neither 
had  any  attraction  for  pi'oducers  of  United  States  silver  bullion. 
Standard  coins  are  simply  bullion,  and  the  change  from  bullion 
form  to  coin  form  is  simply  for  convenience  and  in  no  manner 
affects  the  exchangeable  or  commercial  value  of  the  metal  except 
In  the  incidental  way  heretofore  mentioned. 

Another  Exploded  Fallacy.  The  impression  so  diligently 
cultivated  in  many  quarters  that  the  silver  miner  of  tlie  west 
seeks  free  coinage  of  his  -product  in  order  to  realize  a  profit  to 
the  extent  of  the  difference  between  70  cents  an  ounce  and  $1.29 
an  ounce,  the  "mint  price"  of  silver  if  coined  into  standard  money 
at  the  present  weight  of  the  silver  dollar,  is  a  mere  jugglery 
with  Avords  and  figures.  The  miners'  silver  will  not  command  a 
single  pound  more  of  wheat,  corn,  iron  or  any  other  product  of 
the  labor  of  others  then  than  now,  except  to  the  extent  that  free 
coinage  increases  the  actual  use  and  demand  for  that  metal 
throughout  the  woi-ld. 

Important  Deductions.  Some  legitimate  and  unavoidable 
deductions  from  these  fundamental  facts  are  important  and  prac- 
tical: 

First— Any  increase  of  use  and  demand  for  either  gold  or  sil- 
ver in  any  quarter  of  the  commercial  world  tends  directly  to  in- 
crease the  value  of  money  in  all  the  nations  which  malvc  either 
metal  its  standard;  and  any  disuse  or  lessening  of  the  demand 
will  have  the  reverse  effect. 

Second — While  it  may  be  true  tliat  it  is  tlie  whole  volume  of 
current  money  of  all  kinds  in  a  country  which  constitutes  the 
measure  of  values  and  determines  prices,  nevertheless  the  value 
of  the  standard  is  the  primary  factor  in  determining  that  of  all 
supplementary  kinds. 

Third— All  effort  to  decrease  or  depress  the  value  of  the  stand 
ard  in  any  one  country  by  multiplying  issues  of  token  or  supple 


58  PRINCIPLES    OF    MONEY    AND    COINAGE. 

meutary  mouey  is  I  think,  useless.  It  is  unreasonable  to  believe 
that  by  multiplying  token  silver  dollars  or  paper  dollars  in  the 
United  States  alone  we  can  cheapen  gold  or  reduce  it  in  purchas- 
ing power  here  below  the  plane  of  value  it  occupies  in  other 
nations.  Any  such  apparent  effect  must  in  the  nature  of  things 
be  very  short  lived — merely  temporary.  To  cheapen  money  is  to 
raise  prices,  and  if  it  were  possible  to  reduce  the  pm'chasing 
power  of  gold  with  us  it  would  at  once  seek  those  markets  where 
it  would  command  more  of  other  things,  transportation  and  tariffs 
considered,  than  it  could  at  home.  There  is  no  doubt  but  an  in- 
ordinate issue  of  supplementary  money  will  cheapen  gold,  but  that 
cheapening  process  is  at  once  signalized  by  its  exit  from  use  as 
money.  It  cannot  be  cheapened  by  that  process  and  still  be  re- 
tained in  use.  The  same  law  holds  here  as  in  the  exchange  of 
other  property.  A  man  will  always  carry  his  goods  to  that  market 
where  he  can  get  the  most  for  them.  At  most,  the  cheapening 
effect  (raising  of  prices)  produced  by  increased  issues  of  supple- 
mentary money,  is  only  in  the  proportion  that  such  increase  bears 
to  the  total  A^olume  of  all  kinds  of  money  in  all  the  nations  which 
use  the  same  metal  for  standard.  This  would  be  infinitesimal 
when  applied  within  any  practicable  limit  to  meet  the  present 
emergency  in  the  United  States. 

How  the  Standard  Metal  is  Distributed.  By  the  remark  above 
it  is  not  intended  to  say  that  each  individual  owner  or  any  indi- 
vidual owner  of  gold  would  go  abroad  and  carry  his  gold  with  him 
to  dispose  of  it  in  foreign  countries.  The  movements  of  the  stand- 
ard metal  from  nation  to  nation  are  mainly  determined  by  prices 
and  the  effect  which  prices  have  upon  balances  of  international 
trade.  If  gold  is  cheap  with  us,  which  is  the  same  as  to  say  prices 
are  high,  then  foreign  customers  for  our  goods  buy  in  other  and 
more  favorable  markets.  For  the  same  reason  exactly  we  have  a 
motive  to  increase  our  purchases  abroad,  because  we  get  for  a  lit- 
tle gold  there  what  will  bring  much  gold  at  home.  The  result  is 
an  adverse  balance  of  trade  and  the  gold  must  go  to  satisfy  it. 
It  is  thus  that  the  money  metals  are  distributed  amongst  the  com- 
mercial nations  and  the  equilibrium  in  the  value  of  the  metals 
maintained.  As  a  result  of  these  operations  the  value  of  the  mon- 
ey metals  is  likened  to  the  sea,  which  seeks  a  common  level  all 
around  the  earth,  but  nevertheless  bears  upon  its  surface  tempor- 
ary undulations  or  waves. 

But  both  gold  and  silver,  whether  in  coin  or  bullion,  are  sim- 
ply property  to  be  bought  and  sold  like  other  property,  and  it 


PRINCIPLES    OF    MONEY    AND    COINAGE.  59 

is  possible  of  coui'se  at  any  time  for  au  individual  or  any  number 
of  persons  to  carry  goods  or  secm-ities  to  a  foreign  country,  sell 
them  for  gold  or  silver  and  ship  the  metal  bodily  out  of  that  coun- 
try and  in  defiance  of  the  state  of  general  trade  balances.  But 
such  operations  are  made  at  an  immediate  loss  to  the  parties  en- 
gaged, are  out  of  the  normal  course  of  commerce  and  are  never 
engaged  in  except  for  extraordinary  reasons.  When  a  money  met- 
al is  thus  carried  against  the  cm-rent  of  trade,  it  must  be  hid  away 
or  kept  out  of  such  cm-rent  or  it  will  soon  find  its  way  back. 

A  Paradox.  In  confirmation  of  the  statement  here  made  that 
an  increase  of  token  money  will  not  in  any  marked  or  propor- 
tionate degree  cheapen  the  standard  money  or  always  stay  its  rise 
in  value  even,  reference  is  made  to  the  facts  of  om-  experience  in 
the  last  fom-teen  years.  In  1877  the  total  volume  of  current  mon- 
ey in  existence  within  the  United  States  was  less  than  $800,000,000 
and  yet  prices  were  nearly  or  quite  forty  per  cent,  higher  then 
than  they  are  now,  with  a  total  volume  of  par  and  cm-rent  money 
of  more  than  $1,500,000,000. 

Population  and  property  have  not  increased  at  a  ratio  to  justi- 
fy this  fall  of  prices  when  also  accompanied  with  so  large  an  in- 
crease in  the  volume  of  money. 

This  fact  is  not  a  contradiction  of  the  fundamental  formula  of 
value  heretofore  given,  but  rather  a  vindication  of  it.  Money  has 
become  more  valuable  and  prices  have  fallen  because  of  a  contrac- 
tion of  the  world's  supply  of  standard  money.  If  this  be  the  cause 
of  the  disease,  an  increase  of  the  volume  of  supplementary  or  tok- 
en money  in  any  one  nation  is  not  applying  the  right  remedy  nor 
at  the  proper  point. 

All  that  has  been  said  above  of  standard  gold  money  must 
necessarily  be  true  of  silver  money  and  metal  whenever  and 
wherever  it  is  made  standard  by  free  coinage. 

Illustration.— As  an  illustration  or  test  of  the  assertion  that  it 
is  the  value  of  the  standard  coins  in  use  thnt  determines  the  cur- 
rent value  of  all  supplementary  and  subsidiary  money,  let  us  sup- 
pose that  in  pursuance  of  the  necessary  legislation  by  some  prac- 
ticable method,  all  our  gold  coins  were  reminted  and  the  quantity 
of  pure  metal  in  them  increased,  say  twenty-five  per  cent.,  i.  e.  the 
gold  dollar  would  be  made  to  consist  of  29  grains  instead  of  23.22 
grains  as  at  present.  It  woiild  surely  cost  more  to  buy  the  larger 
quantity  of  gold  than  the  smaller,  and  hence  the  new  dollar 
would  be  more  valuable  than  the  old.    But  all  our  supplementary 


60  PKINCIPLES    OF    MONEY    AND    COINAGE. 

dollars  would  become  more  valuable  in  the  same  degree,  for  the 
same  reasons  which  operate  to  make  all  dollars  equal  to  the  gold 
now,  would  operate  then  and  with  the  same  result. 

If  this  be  true,  then  why  should  not  a  rise  in  the  value  of  our 
gold  coins,  as  a  result  of  a  general  and  world-wide  rise  of  that 
metal,  produce  the  same  effect?  If  the  addition  of  a  few  hun- 
red  millions  of  token  coins  or  paper  notes  would  not  keep  the 
value  of  the  gold  dollar  at  the  same  level,  although  the  quantity  of 
metal  in  it  was  say,  doubled  or  trebled,  how  could  it  do  so  if  the 
same  result  as  to  its  value  was  produced  by  new  demands  in  other 
quarters  of  the  world? 

A  practical  illustration  of  this  matter  was  furnished  in  this 
country  by  the  legislation  of  1834  wlieu  the  gold  dollar  was  re- 
duced in  weight  from  24.75  grains  to  23.22  grains,  tine  metal. 
That  act  made  the  gold  coins  cheaper  than  before  and  cheaper  by 
a  small  margin  than  the  silver  dollar,  which  latter  tended  at  once 
to  disuse  and  all  paper  money  ceased  its  parity  witli  the  silver 
and  conformed  to  the  gold  coins.  (In  speaking  here  and  elsewhere 
of  the  "gold  dollar,"  I  do  not  mean  the  gold  dollar  coin,  but  the 
proportionate  weight  of  gold  to  the  dollar.  The  gold  eagle  of  1834 
contained  232  grains  of  tine  gold  which  was  23.2  grains  to  the  dol- 
lar, but  no  dollar  coin  was  then  made.)  So  to  alter  the  value  of 
our  money  under  present  conditions  it  is  only  necessary  to  change 
the  weight  of  pure  metal  in  the  gold  coins.  If  Congress  were  to 
provide  for  the  recoinage  of  our  gold  money,  prescribing  18  grains 
of  fine  metal  to  the  dollar,  prices  would  at  once  rise  twenty-five 
per  cent,  and  our  paper  money  would  be  at  par  with  tlie  new  gold 
coins,  just  as  it  is  now  witli  the  present  ones. 

A  Ruse.  The  extremely  low  prices  now  prevailing  for  all  sta- 
ple products  has  caused  a  cry  of  anguish  and  begotten  a  demand 
for  more  money.  It  is  proposed  in  some  quarters  to  satisfy  this 
demand  by  additions  to  the  volume  of  supplementary  money  in 
the  form  of  bank  notes.  To  the  mind  of  the  well  informed  and 
discriminating  economist,  this  proposition  appears  only  in  the 
light  of  a  ruse  or  feint,  for  an  increase  of  that  kind  of  money  can- 
not create  any  permanent  reaction  in  prices. 


PRINCIPLES    OF    MONEY    AND    COINAGE.  61 


EIGHTH  PAPER. 


TOKEN    MONEY    CONTINUED-PREMIUM    ON    GOLD— HIS- 
TORY INTERPRETED— PAR  OP  EXCHANGE. 

Volume  of  Token  Money.  Althougli  out  of  its  logical  order, 
it  may  liere  be  stated  that  the  maximum  amount  of  token  and  sup- 
plementary money  which  can  be  floated  at  par  with  the  standard 
coins,  is  indefinite.  Not  without  a  limit  by  any  means,  but  where 
that  limit  is  no  one  knows.  There  appears  to  be  no  economic  law 
fixing  such  limit  with  auj-  degree  of  certainty.  All  readers  of 
these  papers  will  remember  that  great  apprehensions  were  ex- 
pressed in  certain  quarters  fourteen  years  ago  when  the  coinage 
of  token  silver  dollars  began,  that  they  would  drive  from  use  the 
standard  gold  coins.  They  did  not  do  it.  In  every  succeeding 
year  since  1878  the  same  cry  of  alarm  has  been  raised,  but  still  the 
gold  stays  with  us.  In  the  meantime  the  annual  rate  at  which 
token  money  has  been  issued  has  increased  from  about  twenty- 
four  millions  under  the  original  Bland  law,  so-called,  of  1878,  to 
about  thirty-four  millions  under  tlie  Sherman  law.  And  still  the 
gold  stays  with  us,  and  all  forms  of  money  are  still  at  par  with 
each  other. 

If  it  were  settled  by  economic  laws  Just  what  proportionate 
amount  of  token  money  could  be  maintained  at  par  with  the 
standard  and  no  more,  surely  tlie  country  would  have  been  in- 
formed of  it.  But  that  there  is  a  limit,  no  one  can  reasonably 
doubt.  All  that  can  bo  said  upon  that  point  is  that  we  have  not 
yet  exceeded  the  maximum  limit.  How,  fast  we  are  approaching 
that  point  by  the  arbitray  addition  of  about  thirty-four  millions 
a  year  to  the  total  volume  is  uncertain,  for  this  is  a  rapidly  grow- 
ing country  both  in  population  and  wealth,  nnd  coTisequently 
there  is  a  constantly  increasing  and  legitimate  demand  for  more 
money  to  maintain  easy  working  marlcets. 


62  PRINCIPLES    OF    MONEY    AND    COINAGE." 

One  fact  should  uot  be  forgotten,  however,  and  that  is  that 
with  tlie  constant  increase  of  the  kind  of  money  mentioned,  prices 
have  continued  to  shrink  steadily  from  year  to  year. 

The  Ancient  Theory.  Tlic  doctrine  presented  by  the  great 
majority  of  political  economists  is,  that  if  a  nation  increases  the 
volume  of  its  supplementary  or  local  money  and  thus  cheapens 
the  mass  of  its  money  and  causes  a  rise  of  prices,  it  will  cause  an 
export  of  a  corresponding  amount  of  its  standard  money  by  means 
of  the  creation  of  an  adverse  balance  of  trade  as  explained  in  the 
previous  paper.  Likewise,  if  a  nation  contracts  the  value  of  its 
supplementary  money,  it  will  cause  an  importation  of  the  standard 
metal  to  take  its  place,  by  thus  creating  a  favorable  balance  of 
trade,  and  hence  a  nation  is  helpless  to  either  increase  or  diminish 
its  volume  of  money  permanently,  while  in  the  use  of  a  metal 
standard,  for  by  whatever  amount  it  increases  or  diminishes  the 
volume  of  subordinate  money,  reversely  it  will  diminish  or  increase 
the  volume  of  its  standard  money. 

It  is  very  probable  that  the  great  outcry  against  the  coinage- of 
token  silver  dollars  above  referred  to  was  based  upon  this  widely 
accepted  theory,  and  the  consequent  belief  that  every  addition  of 
one  million  dollars  of  these  tokens  would  be  the  cause  of  a  loss  of 
one  million  gold  dollars  by  export,  and  it  would  only  be  a  ques- 
tion of  time,  and  very  short  at  that,  when  the  United  States 
would  be  denuded  of  its  gold,  and  the  silver  dollar  at  the  value  of 
the  fine  metal  it  contained  would  become  by  a  bungling  and  indi- 
rect method  the  pivot  or  standard  of  our  money  system. 

But  how  have  the  facts  corresponded  with  this  tlieory?  The 
coinage  of  token  silver  dollars  was  inaugurated  and  presisted  in 
for  about  thirteen  years,  notwithstanding  the  opposition.  Nearly 
or  quite  four  hundred  and  twenty  millions  of  them  were  added  to 
the  volume  of  our  domestic  money  in  that  time,  and  from  the  be- 
ginning of  this  coinage,  and  continuing  for  many  years,  the 
amount  of  our  gold  money  steadily  increased.  And  even  now 
(1893)  when  the  so-called  Sherman  law  has  superseded  the  Bland- 
Allison  act,  making  a  still  larger  monthly  addition  of  the  same 
class  of  money,  and  after  two  years  of  this  enlarged  issue  of  mon- 
ey, it  is  estimated  that  the  United  States  possesses  about  as 
much  gold  as  any  nation  on  earth  and  it  still  remains  the  measure 
of  vahie  of  our  markets. 

Two  Conclusions.  A  fair  consideration  of  the  foregoing 
facts  seem  to  establish  two  conclusions: 


PRINCIPLES    OF    MONEY    AND    COINAGE.  63 

Fii-st— That  the  ancient  theory  above  set  forth  is  sadly  in 
need  of  some  amendment. 

Second— That  a  much  hirger  volume  of  supplement;u-y  money 
may  be  floated  at  par  with  a  metal  standard  when  issued  by  the 
government  and  fortified  by  a  full  legal  tender  quality,  than  if  the 
same  was  issued  by  individuals  or  corporations,  without  legal  ten- 
der and  dependent  for  value  upon  a  precarious  promise  of  a  spe- 
cific redemption  in  some  other  form  of  money. 

Premium  on  Gold.  The  particular  form  of  the  calamity 
which  it  was  predicted  would  befall  the  country  in  case  of  an  ex- 
cessive issue  of  legal  tender  toiien  coins,  has  been  represented  to 
be  a  premium  upon  gold.  But  no  one  has  to  my  knowledge  un- 
dertaken to  explain  in  precise  terms  just  why  and  how  that  event, 
even  if  it  should  come  to  pass,  would  prove  a  calamity  to  the 
general  public. 

Even  if  gold  should  be  driven  from  the  money  circulation  of 
this  country,  it  could  not  be  properly  said  to  bear  a  premium  in 
any  sense  that  would  unfavorably  affect  the  interests  of  the  mass 
of  the  people. 

Those  who  had  heretofore  entered  into  contracts  to  deliver 
gold,  or  in  other  words,  had  contracted  gold  debts,  would  have  to 
buy  the  gold  with  which  to  pay  them  or  pay  the  equivalent  value 
in  other  money  if  their  creditors  would  consent.  In  either  event 
it  would  take  no  more  property  to  pay  the  debt  than  if  gold  had 
remained  in  current  use  and  at  par  with  other  money,  for  prop- 
erty wiU  be  rated  just  that  much  higher  in  the  markets.  In  other 
words,  by  just  as  much  as  the  .then  standard  dollar  (silver)  is 
lower  in  value  than  the  gold  dollar,  by  just  that  amount  will 
prices  of  all  produce  and  property  be  higher  than  now.  In  point 
of  fact  the  advantage  will  be  upon  the  side  of  the  debtor,  for  the 
disuse  of  gold  in  our  money  system  will  tend  directly  to  depreciate 
that  metal,  and  a  given  quantity  of  wheat,  corn,  cotton  or  meat 
will  command  more  gold  then  than  it  will  now. 

But  the  main  fact  to  which  I  desire  to  direct  attention  is  that 
if  gold  should  command  any  premium  for  any  purpose,  it  would 
cease  to  be  currently  u?ed  as  money  and  would  cease  entirely  to  be 
the  measure  of  value  in  our  miirkots.  If  ''driven  to  a  premium."  as 
it  is  sometimes  expressed,  it  will  at  the  same  time  cease  to  enter 
into  the  reckonings  of  the  people  in  their  daily  transactions,  as 
the  word  "dollar"  in  all  market  quotations  will  then  mean  the 
silver  dollar  and  not  the  gold. 


-^i 


64  PRINCIPLES    OF    MONEY    AND    COINAGE. 

The  phrase  "premium  on  gold"  simply  means  that  it  would 
cost  more  to  get  a  gold  dollar  than  a  silver  dollar  or  the  dollar 
that  constituted  the  then  standard  of  the  markets;  and  if  so,  prices 
of  all  property  and  services  would  be  higher.  This  would  not 
be  considered  a  calamity  by  the  producing  classes. 

Historical  Phenomena  Interpreted.  If  the  total  volume  of 
money  in  any  country  consists  of  standard  coins  as  the  only  un- 
limited legal  'tender  and  a  supplemental  money  of  token  coins  or 
paper  notes  of  very  limited  or  no  legal  tender  function,  and  the 
volume  of  the  latter  be  largely  increased,  or  for  any  other  reason 
it  becomes  reduced  in  its  current  value,  then  the  standard  coins 
will  remain  the  measm-e  of  value  in  the  markets,  while  transac- 
tions will  be  made  in  the  supplemental  money  at  a  discount  as 
compared  to  the  standard  coins.  This  was  the  condition  prevail- 
ing in  the  United  States  prior  to  the  war  of  the  rebellion,  when 
the  notes  of  a  vast  number  of  State  and  private  banks  consti- 
tuted the  paper  money  of  the  country. 

If  the  bulk  of  the  supplementary  money  be  an  unlimited  legal 
tender  and  its  volume  be  so  largely  increased  as  to  cause  it  to  de- 
preciate below  the  value  of  the  standard  coins,  the  latter  will 
altogether  cease  to  be  used  as  current  money,  and  the  supple- 
mental money,  paper  though  it  be,  will  become  the  measure  of 
values  in  the  markets,  and  the  former  standard  coins  and  metal 
will  be  relegated  to  the  commodity  list,  and  be  dealt  in,  if  at  all, 
strictly  as  such,  like  iron,  copper,  wheat  or  cotton. 

During  and  for  some  time  after  the  close  of  .the  late  civil  war, 
greenbacks  having  been  made  unlimited  legal  tender,  with  the 
single  exception  as  to  customs  dues,  they  became  the  standard 
of  all  our  domestic  markets  and  gold  ceased  to  discharge  any 
money  function  with  our  people.  Not  because  gold  coins  had  been 
shorn  by  law  of  any  of  their  former  money  functions,  but  simply 
because  the  people  had  a  cheaper  instrument  for  all  such  pur- 
poses. Whereas,  the  sign  .?  in  all  our  domestic  market  reports  and 
quotations  of  prices  from  1S62  to  1879  meant  the  legal  tender 
greenback  dollar,  prior  to  that  time  and  since  1879  and  up  to 
date,  it  means  the  gold  dollar  or  its  equivalent  in  commercial 
value. 

A  widespread  impression  that  but  for  the  single  exception  in 
,  the  prescription  of  legal  tender  to   the  greenbacks,   they  would 
V   I  have  been  at  all  times  as  valuable,  dollar  for  dollar  as  gold  coins, 
is  a  mistake.'^  Their  volume,  when  combined  with  all  the  other 


\ 


PRINCIPLES    OF    MONEY    AND    COINAGE.  65 

forms  of  money  supplemental  to  them,  was  too  great.    It  is  quan- 
tity that  determines  value  and  not  legal  tender  alone. 

The  Explanation.  The  reason  for  the  facts  recited  under  the 
last  preceding  head  will  be  found  more  at  length  in  the  next 
paper,  but  suffice  to  say  here  that  a  money  which  is  acceptable 
as  a  medium  of  exchange  and  a  legal  tender  in  payment  of  debts, 
if  increased  in  volume  to  an  extent  to  cause  it  to  sink  in  value 
below  that  of  the  previous  standard  metal  coins,  then  such  in- 
creased money  will  become  the  standard  of  the  markets  at  its 
cheaper  value  simply  because  of  the  natural  desire  of  every  in- 
dividual to  pay  as  much  debt  as  possible  with  as  little  of  his  com- 
modities or  labor  as  possible.  The  same  motive  which  causes 
evei'y  man  to  seek  the  highest  price  prompts  the  use  of  the  cheap- 
est money  which  will  answer  his  purposes,  for  the  one  thing  im- 
plies the  other. 

Par  of  Exchange.  Reverting  again  to  the  subject  of  standard 
coins,  one  of  the  chief  merits  of  the  system  is  that  it  affords  a 
"par  of  exchange"  between  nations. 

The  particular  meaning  of  this  phrase  can  best  be  presented 
as  follows: 

Illustration  No.  1.— A  Par  of  Exchaage— Suppose  a  New  York 
merchant  receives  a  bill  rendered  for  goods  bought  in  London. 
The  bill  amounts  to  say  £100  in  English  money.  The  question 
arises:  What  is  a  pound?  The  merchant  proposes  to  sell  the  goods 
for  United  States  dollars  and  cents,  and  very  naturally  he  wants 
to  know  what  they  cost  him  in  dollars  and  cents.  How  is  he  to. 
find  out?  He  knows  that  he  owes  the  London  merchant  £100,  but 
how  many  dollars  does  he  owe  him?  It  is  not  difficult  to  ascer- 
tain imder  present  conditions. 

A  pound  sterling  contains  113  grains  of  fine  gold.  An  United 
States  standard  dollar  contains  23.22  gi-ains  of  fine  gold.  Divide 
the  113  by  23.22  and  you  get  4.8G.G,  Avhich  is  .?4.8G.G,  and  the  bill 
for  the  £100  is  equal  to  $48G.G0  of  our  money.  Gold  is  the  standard 
metal  of  both  nations,  and  the  standard  coins  of  each  are  related 
in  value  precisely  as  they  are  related  in  weight  of  fine  metal.  The 
English  gold  coins  are  eleven-twelfths  fine,  while  ours  are  nine- 
tenths  fine,  but  that  makes  no  difference.  The  alloy  in  coins  cuts 
no  figure  whatever  in  their  value,  whether  they  be  standard  or 
token.  This  relation  of  value  between  a  pound  sterling  and  the 
gold  dollar  is  a  fixed  one  and  never  varies,  because  both  are  made 
of  gold  and  both  have  free  coinage,  and  any  fluctuation  in  the 

3 


66  PRINCIPLES  OF  MONEY  AND  COINAGE. 

metal  in   the  one  country  applies   equally  and  instantly   to  the 
other,  which  exhibits  again  the  reason  for  free  coinage. 

Illustration  No.  2.— Want  of  Par  of  Exchange— Suppose  the 
same  New  York  merchant  buys  goods  in  Bombay  and  receives  a 
bill  reading,  say  1,000  rupees.  Now  what  does  rupee  mean?  He 
seeks  the  same  information  he  wanted  in  the  other  case.  Wants 
to  know  how  many  dollars  his  goods  cost  him.  Upon  inquiry  he 
finds  that  the  rupee  is  made  of  silver  metal,  is  coined  free  and  is 
the  standard  coin  of  India.  He  fm-ther  finds  that  it  contains  165 
grains  of  fine  silver,  is  to  all  intents  and  purposes  merely  a  piece  of 
silver  bullion,  just  as  the  pound  sterling  and  gold  dollar  are  pieces 
of  gold  bullion.  But  what  is  the  relation  of  value  between  dollars 
and  rupees?  There  is  no  fixed  relation  at  all.  The  only  means 
of  finding  out  what  his  goods  cost  him  is  to  look  up  the  market 
price  of  silver.  If  silver  bullion  be  quoted  at  86  cents  an  ounce, 
then  the  165  gi-ains  in  a  rupee  is  worth  29  1-2  cents,  and  1,000 
rupees  mean  $295,  which  is  the  cost  of  his  goods  in  United  States 
dollars,  gold  standard,  if  he  pays  for  them  on  the  day  that  silver 
is  quoted  at  86  ceuts  an  ounce. 

Suppose  he  has  a  competitor  in  the  same  line  of  goods  next 
door  and  both  buy  the  same  goods  in  the  same  quantity  in  India 
and  at  the  same  price  in  rupees.  A  pays  for  his  when  silver  is 
worth  86  cents  an  ounce.  B  waits  a  few  days  and  pays  for  his 
when  silver  is  quoted  at  90  cents  an  ounce.  A  pays  $295  for  his 
goods  and  B  $310,  and  both  pay  the  same  price  in  rupees.  So  it 
is  discovered  that  there  is  no  fixed  relation  of  value  between 
rupees  and  doUars  because  there  is  no  longer  any  bimetallic  bond 
between  them. 

The  same  want  of  par  of  exchange  exists  between  this  coun- 
try and  our  neighbor  Mexico,  which  also  has  a  silver  standard. 
Take  100  silver  dollars  of  our  money  and  you  can  exchange  them 
for  100  dollars  of  gold.  Take  the  gold  to  Mexico  and  you  can  sell 
it  for  about  140  Mexican  silver  dollars,  which  contain  more  pure 
silver  metal  than  our  own.  Then  bring  the  Mexican  silver  dollars 
back  to  the  United  States  with  you  and  sell  them  as  silver  bul- 
lion (all  the  use  you  can  make  of  them)  at  86  cents  an  ounce,  and 
you  get  what  you  started  with,  100  American  silver  dollars  or 
gold  dollars,  just  as  you  please. 

This  illustrates  the  difference  between  a  standard  coin  and  a 
token  coin,  although  both  are  made  of  the  same  metal,  have  the 
same  name  and,  for  that  matter,  have  precisely  the  same  weight 


PRINCIPLES    OF    MONEY    AND    COINAGE.  67 

and  fineness.  If  one  be  a  token  and  the  other  free  coined  and 
standard,  there  is  no  more  intimate  relation  of  value  than  if  the 
one  was  made  of  gold  and  the  other  made  of  leather. 

The  foregoing  illustration  in  reference  to  the  Indian  rupee 
applies  to  the  time  prior  to  the  closing  of  her  mints  in  June,  1893; 
and  transactions  between  citizens  of  the  United  States  and  Mexico 
are  subject  to  the  same  conditions  at  the  present  time.  While 
both  countries  use  the  same  name  "dollar"  and  the  dollar  is  the 
unit  of  money  in  both  countries,  they  do  not  refer  to  the  same 
standard. 


PRINCIPLES    OF    MONEY    AND    COINAGE.  69 


NINTH  PAPER. 


GRESHAM'S    LAW. 

Sir  Thomas  Gresham  was  born  in  London  in  the  year  1519. 
He  was  the  son  of  a  merchant  and  was  himself  a  successful 
merchant  in  early  life,  but  also  developed  a  considerable  talent 
for  diplomacy  and  especially  in  the  line  of  financial  affairs.  The 
period  of  has  life  covers  the  whole  of  the  reigns  of  Elizabeth  and 
Mary  and  portions  of  those  of  Henry  VIII.  and  Edward.  He  was 
in  money  matters  consulted  by  the  crown  and  ministers  of  state 
and  entrusted  with  many  important  commercial  negotiations  with 
adjacent  countries  on  the  continent. 

From  the  frequency  with  which  we  meet  the  phrase  "Gresh- 
am's  law"  in  the  discussion  of  the  subject  of  money  and  coinage 
it  might  be  inferred  that  this  gentleman  made  some  remarkable 
discovery  in  monetary  science  analogous  to  those  of  Herschell  and 
Galileo  in  astronomy  or  of  Davy  in  chemistry.  But  in  fact  what 
has  been  dignified  by  the  name  of  Gresham's  law  is  only  one  of 
the  simplest  facts  of  every  day  experience  in  commerce. 

It  had  been  observed  in  England  that  the  new  coins  as  they 
came  from  the  mint  would  soon  disappear  from  the  channels  of 
circulation  and  that  it  was  only  those  which  were  considerably 
worn  by  use  that  were  generally  handled  by  the  people  in  making 
their  exchanges  and  payments.  This  was  at  a  time  when  all  the 
silver  coins  of  England  were  made  by  the  process  of  free  coinage, 
and  were  consequently  standard,  just  as  all  silver  coins  were 
formerly  in  the  United  States.  The  question  arose  with  those  in 
authority,  why  is  this?  Why  do  the  good  full  weight  coins  dis- 
appear and  only  the  lighter  and  those  much  worn  remain  in  use 
as  money? 

Upon  investigation  it  was  discovered  that  only  the  new  and 
full  weight  coins  could  be  exported  without  loss  to  the  owner, 
because  when   rcr-fivfd   in   rdhr-r  countries   it   was  a   bnllidn   only 


70  PRINCIPLES    OF    MONEY    AND    COINAGE. 

and  by  weij^lit  and  not  by  count  or  by  name  or  "tale,"  as  it  is 
usually  termed,  as  they  circulated  at  home.  If  worn  coins  were 
exported  the  exporter  would  lose  in  the  transaction  whatever  the 
coins  had  lost  in  weight  by  the  abrasion  in  use,  whereas  a  worn 
coin  would  cost  him  as  much  at  home  as  a  new  one  just  from  the 
mint. 

It  was  also  discovered  that  manufacturers  in  selecting  coins 
for  making  jewelry  and  plate  would,  of  coiu-se,  take  the  new  ones 
of  fuU   weight  for  such  purposes,   and  for  precisely   the   same 

reasion.    They  would  get  more  metal  a/t  the  same  cost. 

Mr.  GreshajB  lis  credited  with  making  these  discoveries  and 
the  combination  of  the  fact  and  the  reason  for  it  constituted 
originally  what  came  to  be  kno'wu  as  "Gresham's  law." 

As  usually  stated  the  law  is,  that  "bad  money  will  always 
drive  out  good  money,"  and  as  originally  illustrated  above  this 
way  of  stating  it  is  correct.  A  much  worn  sovereign  or  crown 
or  shilling,  while  it  went  from  hand  to  hand  in  England  freely 
by  those  names,  and  was  paid  and  accepted  without  question,  yet 
in  strictness  they  were  not  what  they  piu-ported  to  be,  for  each 
of  these  coins  were  standard  and  purported  to  have  a  certain 
weight  of  pure  metal  in  them  when  they  did  not.  The  critical 
reader  will  however  observe  that  the  bad  coins  did  not  really 
drive  out  the  good  ones,  for  the  good  ones  were  merely  appro- 
priated to  uses  which  the  others  could  not  so  well  serve,  thus 
leaving  only  the  poor  coins  for  general  domestic  money  purposes. 
It  is  also  to  be  observed  here  that  this  original  statement  of 
Gresham's  law  can  only  apply  to  standard  coins,  for  tokens  can 
never  in  any  country  be  used  for  manufacturing  purposes  or  ex- 
port without  loss  to  the  owner.  No  jeweler  in  this  country  will 
use  oui-  present  silver  dollar  to  make  a  trinket  when  he  can  take 
the  same  dollar  into  the  market  and  buy  the  amount  of  silver 
bullion  it  contains  for  70  cents  and  have  30  cents  of  gold  value 
left. 

The  Law  Extended.  In  after  years  the  fact  that  the  cheaper 
of  two  metals  when  coined  into  standard  money  will  supplant  the 
dearer  in  use,  is  also  caUed  an  effect  of  Gresham's  law,  because 
it  Involves  the  same  principle  in  commerce,  to  wit:  A  constant 
effort  to  achieve  results  at  the  smallest  cost.  If  it  is  not  the 
same  it  is  at  least  the  corollary  of  that  law  of  labor,  a  persistent 
attempt  to  supply  our  wants  with  the  least  exertion. 


PRINCIPLES    OP    MONEY    AND    COINAGE.  71 

People  will  alwaj-s  pay  their  debts  willi  the  inouey  that  costs 
them  the  least  and  as  a  rule  regardless  of  the  morals  of  the 
transaction.  Upon  the  other  hand  creditors  are  equally  intent 
upon  exacting  the  money  that  costs  the  most  and  with  equal  blind- 
ness to  any  moral  quality  of  the  transaction.  ALL  this  is  simply  to 
say  that  everybody  is  "on  the  make"  in  a  practical  way,  and  the 
matter  of  morals  is  generally  left  to  the  speculations  of  the  phil- 
osophers. 

Illustration.  Suppose  that  A  owes  a  debt  of  100  bushels.  Not 
bushels  of  potatoes  or  of  parsnips,  but  simply  "•bushels." 
Suppose  bushels  of  wheat  and  corn  are  each  and  alike  legal 
tender  for  the  discharge  of  such  an  obligation,  and  where  an 
alternative  exists  the  option  always  rests  with  the  debtor. 
Now  if  wheat  be  twice  as  valuable  as  corn  by  the  bushel 
it  is  easy  to  divine  which  wiU  be  the  medium  of  paynu'Ut. 
The  cheaper  is  certain  to  be  used  and  particularly  so  if 
the  debtor  has  the  right  to  cai'ry  a  bushel  of  either  to  the 
town  hall  and  have  it  stamped  (free  coinage)  as  a  legal  bushel 
for  such  payment.  Substitute  the  word  "dollar"  for  bushels  in 
this  illustration  and  we  discover  the  operation  of  Gresham's  law 
in  the  use  of  standard  money  in  making  payments.  The  cheaper 
wiU  be  the  one  in  use. 

Another  mode  of  arriving  at  the  same  result  will  be  foimd  in 
the  operation  of  the  markets.  If  one  money  be  dearer  than  an- 
other the  cheaper  will  become  the  measure  of  value  in  the  mar- 
ket, for  whoever  has  property  to  sell  can  get  more  of  the  chaiper 
money  for  it  and  each  will  pay  the  same  amount  of  debts  and 
taxes. 

The  Morals  of  the  Case  Illustrated.  Some  critic  may  say 
that  tlif  option  of  payment  in  the  above  illustration  amoimts  to 
nothing  more  than  the  offer  of  an  opportunity  to  defraud  and  he 
will  illustrate:  Suppose  A  borrows  bushels  of  wheat  and  when 
the  debt  is  due  wheat  is  worth  double  what  corn  is,  and  yet  the 
debtor  pays  in  corn.  Is  not  that  dishonest?  I  answer,  perhaps  so 
and  perliaps  not.  It  will  depend  entirely  upon  what  the  value  of 
the  wheat  was  when  borrowed  as  compared  to  the  value  of  the 
wheat  and  the  corn  respectively  when  the  debt  was  paid.  The 
moral  obligation  of  the  contract  is  that  the  debtor  shall  repay  the 
precise  value  he  received;  and  if  wheat  has  advanced  in  value 
since  ne  made  the  debt,  and  corn  at  the  date  of  payment  has  pre- 
cisely the  value  of  the  wheat  when  borrowed,  then  to  pay  in  corn 
squares  with  the  most  rigid  interpretation  of  the  moral  law. 


72  PRINCIPLES    OF    MONEY    AND    COINAGE. 

Gresham's  Law  a  Fact.  In  recent  discussions  of  the  coinage 
question  in  and  out  of  congress,  Gresliam's  law  lias  been  often 
impeached  and  pronounced  a  myth  because  the  coinage  and  use 
of  the  present  silver  dollar  has  not  driven  gold  coins  from  circu- 
lation as  money  and  from  their  position  as  the  standard  of  the 
markets.  The  facts  of  the  situation  seem  not  to  be  clearly  under- 
stood. This  application  of  Gresham's  law  is  predicated  upon  a 
difference  in  value  between  two  or  more  kinds  of  money.  There 
has  been  no  difference  of  value  between  silver  dollars  and  gold 
coins  in  recent  years  in  the  United  States.  Our  present  silver  dollar 
is  a  token  which  every  day  and  hour  since  its  coinage  began  in 
1878  has  been  equivalent  in  value  to  the  gold  dollar  within  the 
limits  of  use  of  United  States  token  money. 

Whenever  for  any  cause  om*  silver  doUars  come  to  have  less 
value  in  our  markets  than  gold  doUars,  then  Gresham's  law  will 
come  into  play,  and  it  wiU  soon  be  discovered  that  the  cheaper 
money  has  replaced  the  dearer. 

The  application  of  the  words  "good"  and  "bad"  in  statements 
of  the  operation  of  Gresham's  law  are  also  very  misleading.  The 
dearer  money  may  be  the  bad  money  and  the  cheaper  the  good. 
Our  gold  coins  may  be  the  bad,  and  our  silver  dollar,  at  its  bullion 
value,  the  good  money.  It  all  depends  upon  the  value  that  each 
has  or  may  have  under  given  circumstances,  and  the  value  that 
a  dollar  ought  to  have  to  justly  discharge  the  obligation  of  a  con- 
tr.-U't. 


PRINCIPLES    OF    MONEY    AND    COINAGE.  73 


TENTH  PAPER. 


MONOMETALLISM  AND  BIMETALLISM. 

The  preceding  numbers  of  this  series  have  been  devoted  to 
the  discussion  and  presentation  in  brief  scope  of  fundamental 
facts  and  principles.  The  remainder  of  the  series  will  be  mainly 
taken  up  with  the  application  of  these  principles  in  the  two  com- 
peting systems  of  metallic  money  commonly  designated  as  mono- 
metallism and  bimetallism. 

Monometallism.  I  can  do  no  better  in  defining  this  term 
than  to  adopt  the  language  of  the  late  Professor  Laveleye  ("Ele- 
ments of  Political  Economy"),  :^  writer  of  great  learning  and 
ability.    It  is  as  follows: 

Monometallism:  "The  monometallic  system  only  accords  free 
coinage  and  unlimited  legal  currency  (legal  tender)  to  pieces  of 
one  metal— either  gold,  as  in  England,  or  silver,  as  in  Austria." 

(The  situation  in  Austria  has  been  changed  since  the  above 
was  written.) 

This  definition  is  certainly  very  simple  and  easily  understood. 
Free  coinage  and  unlimited  legal  tender  for  pieces  of  one  metal 
only. 

It  is  to  be  observed  that  in  the  coinage  no  arbitrary  nor  force 
measures  are  employed.  Free  coinage  is  merely  "accorded"  to  the 
metal.  It  is  presumed  that  owners  of  the  metal  will  offer  it  for 
coinage,  or  at  least  a  sufllcient  quantity  of  it  to  answer  the  needs 
of  domestic  commerce.  The  assaying,  alloying  and  stamping  of 
the  metal  is  generally  a  gratuitous  service  perfoi-med  by  the  gov- 
ernment officials,  and  for  reasons  which  have  been  heretofore 
explained,  and  as  it  offers  the  readiest  and  cheapest  means  to  the 
metal  owner  of  converting  his  product  into  other  forms  of  prop- 
erty, no  further  inducement  is  necessary  to  enable  the  mints  to 
get  the  metal. 


74  PRINCIPLES    OF    MONEY    AND    COINAGE. 

It  matters  not  what  the  quautity  or  quaUty  or  material  of  the 
token  coinage  in  use  with  the  standard  coins,  nor  what  the  paper 
notes;  where  only  one  metal  is  admitted  to  free  coinage  and  the 
coins  so  made  are  in  use  and  at  par  with  the  other  money,  the 
condition  is  one  of  monometallism— one-metallism.  If  the  quan- 
tity of  other  or  supplementary  money  be  so  largely  increased  as 
to  depreciate  it  as  compared  to  the  standard  metal  money,  the 
latter  will  go  out  of  use  (if  any  considerable  portion  of  the  sup- 
plementary money  be  an  unlimited  legal  tender)  and  a  condition 
of  suspension  of  specie  payments  ensues.  A  country  in  such  a 
condition  is  said  to  be  a  monometallic  country  theoretically,  but 
the  standard  is  not  "effective." 

Bimetallism.  Here  we  will  also  adopt  Professor  Laveleye's 
definition,  as  it  is  entirely  accurate. 

Bimetallism:  "The  monetary  system  of  the  Latin  Union  is 
called  the  double  standard  or  bimetallic  system,  because  it  permits 
in  principle  the  free  and  unlimited  coinage  both  of  gold  and  silver 
pieces,  to  each  of  which  it  gives  legal  currency  (legal  tender)." 

The  reference  to  the  Latin  Union  above  was  of  course  before 
it  had  closed  its  mints  to  silver. 

Here  again  we  observe  the  word  "permits"  in  the  English 
translation  which  was  made  by  Professor  Pollard  of  Oxford,  and 
is  undoubtedly  the  right  word.  No  compulsion  is  employed  in 
bringing  the  metals  to  the  mints,  nor  is  any  element  of  force  im- 
parted to  the  coins  as  the  metal  is  returned  to  the  owner,  beyond 
that  necessary  in  the  making  of  any  kind  of  legal  tender  money. 

The  coins  as  they  go  foi'th  fi-om  the  mint  have  no  greater  value 
than  when  the  metal  went  into  it,  and  the  value  transferred  in  a 
compulsory  payment  by  means  of  these  coins  is  neitlier  less  nor 
greater  than  the  particular  pieces  of  metal  have  in  the  open  mar- 
kets of  the  world  as  bullion— as  a  commodity. 

The  same  facts  apply  here  as  in  the  case  of  monometallism. 
It  matters  not  what  the  supplementary  money  may  be,  whether 
it  be  a  legal  tender  or  not,  or  of  what  it  may  be  made.  Bimetal- 
lism—two metallism— cannot  exist  in  any  form  or  degree  unless 
the  mint  be  open  to  two  metals.  The  simplicity  and  clearness  of 
the  foregoing  definitions  afford  no  opportunity  nor  excuse  for  the 
great  amount  of  jugglery  with  words  about  the  coinage  which 
has  lately  characterized  the  utterances  of  many  leading  legis- 
lators and  financiers  in  discussing  this  subject.  That  the  fore- 
going definitions  are  scientific  and  accurate  is  abundantly  shown 
by  analysis  of  the  effects  of  the  policies  indicated. 


PRINCIPLES    OF    MONEY    AND    COINAGE.  75 

Legal  tender  tokens  of  one  metal  with  free  coinage  imd  legal 
tender  of  the  other  does  not  constitute  bimetallism  of  any  kind. 
The  ratio  in  weight  between  token  and  standard  coins  is  a  mat- 
ter of  no  seientitic  nor  economic  importance.  The  fact  tliat  unr 
present  silver  dollar  and  gold  coins  have  the  ratio  of  16  to  1  in 
weight  is  not  of  the  slightest  practical  significance  and  consti- 
tutes no  featm-e  of  bimetallism,  so  long  as  the  mints  are  closed 
to  the  free  coinage  of  the  silver  dollars. 

It  should  be  particularly  noted  also,  that  the  foregoing  defi- 
nition of  bimetallism  does  not  even  remotely  imply  that  coins 
of  both  metals  shall  circulate  together  all  the  time  nor  even  at 
any  time.  The  language  is,  "permits  in  principle  the  free  and 
unlimited  coinage,  etc."  Owners  of  both  metals  may  not  offer 
them  at  the  mints  on  the  same  day  nor  in  the  same  year  but  the 
mint  must  be  open  to  receive  either  or  both  at  all  times.  A  bi- 
metallic condition  may  exist  where  only  one  metal  is  in  use 
among  the  people,  and  with  all  the  benefits  which  the  friends 
of  bimetallism  claim  for  it. 

This  feature  of  the  subject  wiU  be  ftu-ther  considered  in  later 
papers. 

The  Standard  Coin  Money  Theory  as  Respects  Legal  Tender. 
With  reference  to  the  legal  tender  feature  conferred  upon  the 
coins  it  should  be  remarked  particularly,  that  according  to  the 
strict  metal  money  theory,  there  shoidd  be  no  other  unlimited 
legal  tender  money  besides  the  coins  which  issue  from  a  free 
mint.  Such  was  formerly  the  practice  in  all  the  chief  commer- 
cial countries,  but  in  recent  years  there  has  been  a  wide  depart- 
ure from  that  rule.  In  the  United  States  we  have  made  paper 
dollars  (greenbacks)  practically  an  unlimited  legal  tender.  Later 
we  made  silver  dollars  of  limited  coinage  unlimited  legal  ten- 
der. When  the  Latin  Union  closed  its  mints  to  silver,  that  day 
every  silver  coin  in  France,  Belgium,  Switzerland  and  Italy  be- 
came a  token,  but  they  were  not  shorn  of  their  legal  tender  qual- 
ity  and  have  not  been  up  to  this  time. 

This  innovation  has  been  always  and  everywhere  stoutly  re- 
sisted by  the  creditor  classes.  As  there  is  no  barrier  to  the  de- 
preciation of  paper  money  or  token  coins  except  the  virtue  and 
wisdom  of  legislative  bodies,  creditors  fear  that  such  will  not  be 
sufficient,  especially  in  times  of  panic  and  commercial  depression, 
and  partictUarly  in  popular  governments.  As  heretofore  pointed 
out   the  value  of  all  supplementary  money,  both  pnpor  and  token 


76  PRINCIPLES    OF    MONEY    AND    COINAGE. 

coius,  is  liable  to  depreciation  by  too  great  au  issue  of  tliem. 
They  always  liave  a  value  in  excess  of  that  of  the  material  of 
which  they  are  made  when  in  commodity  form,  and  while  their 
quantity  is  properly  limited  will  have  a  value  equal  to  that  of 
standard  coins;  but  the  great  outcry  iu  the  United  States  since 
the  coinage  of  token  silver  dollars  began  in  1878,  betrays  the  ex- 
treme nervousness  of  the  creditor  class  lest  the  limit  of  prudence 
be  passed  in  the  matter  of  volume  and  they  drop  below  the  stand- 
ard gold  coins  in  value  while  still  retaining  their  legal  tender 
quality.  They  have  no  objection  whatever  to  receiving  either 
greenbacks  or  silver  certificates  in  payment  of  either  the  interest 
or  principal  of  their  claims  so  long  as  these  kinds  of  money  have 
the  value  of  gold  coins.  But  the  possibility  of  a  different  order 
of  things  is  what  creates  apprehension  and  the  possible  weight  of 
the  precedent,  if  it  should  once  be  established/^ 

The  Creditor's  Side.  We  Avill  allow  the  creditor  to  state  his 
case  thus:  "If  I  lend  my  money  for  five,  ten  or  twenty  years  and 
only  standard  coins  are  legal  tender  in  payment  of  my  claim,  the 
only  risk  I  take  in  being  paid  a  depreciated  money  is  tliat  new 
mines  of  the  standard  metal  may  be  discovered  somewhere  iu  the 
world  and  its  quantity  be  thus  so  largely  increased  as  to  result  in 
a  general  depreciation  of  its  value.  But  if  a  depreciation  takes 
place  it  must  be  world  wide,  and  that  I  perhaps  cannot  avoid, 
and  that  rislc  I  must  assume." 

"But  if  metal  tokens  or  paper  notes  are  made  legal  tender  for 
the  discharge  of  my  claims,  a  legislature  or  congress  of  men  who 
profess  to  believe  that  there  cannot  be  too  much  of  any  good 
thing  may  so  increase  the  volume  of  printed  money  or  cheap 
tokens  as  to  reduce  their  value  to  one-half  or  one-quarter  that  of 
the  standard  coins,  and  when  the  principal  of  my  claim  becomes 
due  I  may  be  legally  paid  in  a  money  that  is  comparatively  worth- 
less." 

The  Debtor's  Side.  Now  we  will  let  the  debtor  state  his 
case:  "If  I  and  all  my  class  are  required  to  pay  only  standard 
coins,  or  by  a  favor,  the  equivalent  in  value  of  the  standard  coins, 
with  decreasing  production  from  the  mines  and  large  increase 
of  population  and  property  and  use  and  demand  for  money,  I  am 
sure  to  have  to  pay  a  much  greater  value  than  I  received.  Besides 
that,  if  the  legal  tender  quality  be  limited  to  the  standard  coins, 
this  alone  would  so  increase  the  use  and  demand  for  them  as  to 
largely  increase  their  value.     More  than  this.  I  can  see  no  reason 


PRINCIPLES    OF    MONEY    AND    COINAGE.  77 

why  a  money  which  is  good  enough  to  pay  a  debt  of  $5  is  not 
good  enough  to  pay  a  debt  of  $5UU  or  any  larger  amount.  A 
money  which  is  made  legal  tender  at  aU  must  be  legal  tender  for 
all.  Besides  this,  you  are  and  must  be  dependent  in  the  end  upon 
the  virtue  and  integrity  of  the  very  power  you  affect  to  distrust. 
It  is  only  in  virtue  of  the  laws  Avhich  proceed  from  congresses 
and  legislatures  in  this  democratic  age  that  you  can  enforce  col- 
lection of  your  debt  at  all.  Finally,  any  money  which  is  not  sus- 
tained in  its  uses  by  some  legal  tender  provision  is  verj'  liable 
to  be  buffeted  about  and  discounted  and  discredited  by  the  money 
changers  to  the  loss  and  annoyance  of  those  who  handle  but  small 
sums." 

If  there  were  not  at  least  two  sides  to  this  matter,  it  would 
not  be  a  question.  But  to  this  there  is  a  tliird  side  and  tliat  I  will 
caU 

The  Economist's  View.  When  A  borrow^s  of  B  a  sum  of 
money  upon  contract  to  retiu-n  it  at  a  given  time,  besides  paying 
an  agreed  rate  of  hire  for  its  use  in  the  meantime  (interest),  A 
receives  a  certain  value  or  purchasing  power,  and  his  contract, 
strictly  construed,  is  to  return  the  same  value  or  purchasing 
power  which  he  received,  no  more  and  no  less.  To  do  less  than 
that  is  a  wrong*  to  B,  the  lender.  To  be  compelled  to  do  more 
than  that  is  a  wrong  to  A,  the  borrower.  Now  money  is  a  thing 
which  is  constantly  fluctuating  in  value  and  that  being  true,  how 
in  the  world  is  exact  justice  to  be  insured  in  the  dealings  be- 
tween A  and  B?  Exact  justice  cannot  be  insured  but  it  should 
be  approximated  as  nearly  as  possible. 

The  Constitutional  Arbiter.  The  fathers  of  our  government 
were  in  many  respects  wise  men  in  their  day  and  generation  and 
in  some  important  respects  their  wisdom  and  foresight  were  re- 
markable, as  illustrated  by  subsequent  events.  They  knew  that 
dollars  of  any  kind  would  fluctuate  in  value,  and  that  the  neces- 
sity for  regulation  of  their  value  was  imperative,  even  when  the 
commerce  and  industry  of  the  people  was  but  a  fraction  of  what 
it  is  to-day.  Hence  the  Constitution  of  tlie  United  States  says: 
"Congress  shall  have  power  to  coin  money  and  regulate  the  value 
thereof  *  *  *,"  etc.  This  power  of  regulating  the  value  of 
money  was  essential  to  prevent  one  class  of  citizens  from  rob- 
bing another  under  the  forms  of  law,  and  no  safer  and  more  ap- 
propriate repository  of  that  power  existed  in  our  form  of  govern- 
ment than-  the  congress  of  the  United  States. 


78  PRINCIPLES    OF    MONEY    AND    COINAGE. 

Congress  is  not  limited  in  the  means  it  may  employ  in  that 
duty  of  regulation  except  by  the  laws  of  natm-e. 

Of  the  power  and  duty  of  congress  in  reference  to  tliis  subject 
more  will  be  said  hereafter.  This  digression  upon  the  subject  of 
legal  tender  was  necessary  to  illustrate  the  reason  of  the  claim 
made  that  only  free  coined  money  should  be  made  unlimited 
legal  tender,  viz.:  That  its  value,  theoretically  considered  at 
least,  is  not  so  liable  to  depreciation  as  that  of  token  coins  and 
other  forms  of  supplementary  money.  But  the  innovation  men- 
tioned is  in  all  probability  a  permanent  one  in  this  coimtry  at 
least. 

In  the  next  number  I  shall  point  out  how  this  legal  tender 
feature  of  standard  coins,  in  conjimction  with  the  faulty  defini- 
tion of  the  third  function  of  money  heretofore  remarked,  has 
caused  some  serious  blunders  in  recent  writings  upon  the  subject 
of  bimetallism. 


PRINCIPLES    OF    MONEY    AND    COINAGE.  79 


ELEVENTH  PAPER. 


MONOMETALLISM    AND  BIMETALLISM  CONTINUED. 

The  Mistake  of  an  Economist.  The  most  pretentious  book 
yet  published  in  this  country  upon  the  subject  of  Bimetallism  is 
that  by  J.  Lawrence  LaughMn,  then  assistant  professor  of  Po- 
litical Economy  at  Harvard  College  (but  now  occupying  a  similar 
position  in  the  Chicago  University),  published  in  1886,  entitled 
"The  History  of  Bimetallism  in  the  United  States."  It  contains 
much  valuable  matter  of  an  historical  character,  but  unfortunately 
the  deductions  and  arguments  of  the  author  are  of  little  or  no 
force  because  based  upon  a  complete  misconception  of  his  sub- 
ject. 

The  following  are  Professor  Laughlin's  definitions: 

Monometallism:  "Its  advocates  regard  gold  as  the  least  varia- 
ble of  the  two  metals,  and  as  best  suited  for  large  payments." 

National  Bimetallism:  "The  selection  of  both  gold  and  silver 
by  an  individual  state  as  legal  payment  of  debts  to  any  amount, 
at  a  ratio  fixed  without  regard  to  the  legal  ratios  of  other  states." 

International  Bimetallism:  "An  agreement  between  the  chief 
commercial  nations  of  the  world  on  one  given  ratio  (e.  g.,  15  1-2:1) 
would,  in  the  opinion  of  this  other  school,  keep  the  value  of  silver 
relatively  to  gold  invariable,  and  so  cause  the  concurrent  use  of 
both  metals  in  all  the  countries  of  such  a  league." 

It  is  quite  apparent  from  these  definitions  that  the  professor 
regards  the  whole  matter  of  the  metallisms  to  turn  upon  the  point 
of  legal  tender  alone.  If  there  were  any  doubt  with  reference 
to  this,  it  would  be  removed  by  reading  the  following  from  the 
preface  of  his  book: 

"Money  has  three  functions  to  perform:  As  a  medium  of  ex- 
change (to  transfer  value),  as  a  common  denominator  of  values 


80  PRINCIPLES    OF    MONEY    AND    COINAGE. 

(to  compare  values),   and  as  a  standard   of  deferred  payments. 
Now,  bimetallism  is  concerned  only  zcilli  this  last  function.'" 

I  have  italicized  these  last  words,  as  they  are  conclusive  as  to 
the  meaning  and  understanding  of  the  author  in  question. 

This  error  of  the  learned  professor  is  directly  traceable  to 
another  and  very  common  one,  heretofore  pointed  out  in  these 
papers,  viz.:  That  money  is  a  standard  of  value  solely  because 
and  by  means  of  it  being  made  a  legal  tender.  Thus  those  who 
study  the  subject  in  a  casual  way  and  write  boolis  by  rote  or  as 
mere  copyists,  are  good  vehicles  for  the  perpetuation  of  error. 

If  bimetallism  consisted  of  legal  tender  only  of  coins  of  two 
metals,  then  we  have  it  at  present  in  the  United  States,  and  this 
author  so  asserts  Avhen  in  speaking  of  National  Bimetallism 
he  says:  ''An  example  of  this  system  is  to  be  found  at  present  in 
the  United  States,"  etc.  Then,  with  the  most  singular  predilec- 
tion for  error  he  asserts,  "Monometallists"  (and  he  is  one,)  "hold 
that  national  bimetallism  is  an  impossibility  for  any  length  of 
time,  since  as  soon  as  one  metal  in  the  market  falls  slightly  be- 
low the  legal  ratio,  the  other  metal  will  be  driven  out  of  circula- 
tion." 

When  the  foregoing  was  written,  the  Bland  token  silver  dollar 
had  been  undergoing  coinage  at  the  rate  of  more  than  two  mil- 
lion dollars  per  month  for  eight  years,  and  the  silver  metal  had 
already  dropped,  not  "slightly,"  but  largely  below  the  legal  ratio 
and  yet  gold  had  not  been  "driven  out  of  circulation."  To  make 
this  mistake  all  the  more  apparent,  it  is  only  necessary  to  call 
attention  to  the  fact  that  the  Bland  dollar  continued  to  be  coined 
for  four  years  after  the  publication  of  the  above  statement  and 
until  more  than  four  hundred  millions  had  been  added  to  the 
mass  of  money  in  the  country,  and  until  silver  had  lost  more  than 
one-third  of  its  value  as  compared  to  gold  in  the  ratio  of  16  to  1, 
and  still  the  gold  coins  remained  in  circulation  and  do  so  to  this 
day,  late  in  1893. 

The  Error  Analyzed.  If  the  foregoing  misconception  of  the 
subject  was  confined  to  any  one  person  or  a  few,  it  would  not 
justify  any  particular  effort  to  dispel  it;  but  a  rather  wide  ac- 
quaintance with  the  current  literature  of  the  subject  and  a  close 
observation  of  the  course  of  discussion  in  the  press  and  in  con- 
gress induces  the  belief  in  the  mind  of  the  writer  that  a  rather 
widespread  mystification  exists  upon  this  point.  Senator  Sher- 
man of  Ohio  has  recently  said  there  are  "several  kinds  of  bimet- 


PRINCIPLES    OP    MONEY    AND    COINAGE.  81 

allisin,"  while  iu  reality  there  is  but  one  kind  worthy  of  mention 
or  the  attention  of  statesmen  and  affecting  in  any  considerable 
degree  the  interests  of  the  masses  of  the  people  in  their  commer- 
cial relations. 

First— The  word  bimetallism  is  one  of  recent  use,  and  appears 
only  in  the  supplement  of  the  1S8S  edition  of  "Webster's  diction- 
arj".  It  is  derived  from  the  Latin  word  "bis,"  twice  or  two,  joined 
to  the  English  Avord  metal,  and  signifies  literally,  two  metals. 
It  is  there  incorrectly  defined  as  the  legalized  use  of  two  metals 
as  money  at  a  fixed  relation  of  value.  This  definition  is  by  no 
means  complete  nor  accia-ate.  Under  that  system  the  use  of  the 
metals  would  be  legal  whether  of  the  same  value  or  not;  and  an 
absolutely  fixed  relation  of  value  is  a  thing  Avhich  economists  re- 
gard with  considerable  doubt  and  is  not  an  essential  in  scientific 
bimetallism. 

Second— The  prime  reason  which  has  sustained  the  standard 
metal  money  system  amongst  the  nations  hitherto,  is  that  by  free 
coinage  of  the  metal,  in  addition  to  all  that  is  gained  in  the  way 
of  convenience  and  certainty  etc.,  the  value  of  the  coin  is  made 
one  with,  on  a  par  or  level  with,  the  world's  mass  of  that  metal. 
There  is  nothing  national,  local,  conventional  nor  accidental  in 
that  value.  The  value  of  a  coin  of  that  kind  is  substantially  the 
same  as  that  of  a  like  weight  of  the  same  metal  anywhere  and 
everywhere  else  in  the  world,  because  it  has  so  great  value  in 
proportion  to  weight  or  bulk,  that  one  grain  of  it  will  pay  for 
transporting  one  hundred  grains  round  the  earth.  It  is  only  by 
means  of  free  and  gratuitous  coinage  that  this  result,  essential  to 
the  fundamental  idea  of  standard  metal  money,  can  be  secured. 

Third— By  establishing  such  a  standard  coinage  and  giving 
the  coins  by  legal  tender  laws  all  the  uses  which  money  will 
serve,  they  afford  a  point  or  standard  in  fact  by  which  to  gauge 
or  regulate  the  volume  of  all  supplementary  money,  which,  for 
reasons  of  convenience  if  no  other,  the  commerce  and  industries 
of  the  people  demand.  Either  by  a  process  of  redemption  of 
these  supplementary  dollars  in  the  standard  dollars,  or  by  and 
through  their  equivalent  uses  in  domestic  commerce  (mainly  by 
the  latter,  I  think),  all  these  supplementary  dollars  are  made  to 
have  the  same  value  as  the  standard,  and  hence  all  transactions 
in  the  markets  and  payments  made  with  the  latter,  are  prac- 
tically the  same  in  point  of  the  value  involved,  as  if  made  by  or 
witli  the  stnndard  coins. 


82  PRINCIPLES    OF    MONEY    AND    COINAGE. 

Foiu-th— Keeping  carefully  in  view  tlie  foregoing  points,  let 
us  inquire:  (1)  Is  the  value  of  om-  present  silver  doUar  on  a  par 
or  level  with  the  same  quantity  of  the  silver  metal  in  this  coun- 
try or  elsewhere  in  the  world?  It  is  not.  A  silver  dollar  will  buy 
nearly  twice  as  much  silver  metal  here  at  home  as  it  contains. 
(2)  Is  the  value  of  our  present  tive-doUar  gold  piece  on  a  par  or 
level  with  the  same  quantity  of  the  gold  metal  elsewhere  in  the 
world?  It  is.  It  will  never  buy  here  nor  elsewhere  any  more 
gold  metal  than  itself  contains.  (3)  In  paying  a  debt  with  our 
present  silver  dollar  do  we  transfer  only  the  value  which  that 
quantity  of  silver  metal  has  in  the  markets  of  the  world?  Not 
at  all;  but,  on  the  contrary,  we  transfer  the  exact  value  which  a 
gold  dollar  has.  (4)  In  exchanging  silver  dollars  for  commodities, 
do  we  give  for  the  latter  the  value  which  that  weight  of  silver 
metal  has,  either  in  that  particular  market  or  in  any  other  market 
in  the  world?  Not  at  all,  but  in  every  case  we  give  the  value 
w^hich  that  number  of  gold  dollars  have,  and  that  is  the  same  in 
all  markets.  (5)  In  oiu-  use  of  the  present  token  silver  dollar,  has 
it  maintained  any  steady  relation  of  value  whatever  to  the  quan- 
tity of  silver  metal  which  it  contains?  Not  at  all.  It  would  not 
exchange  for  the  same  quantity  of  silver  metal  on  hardly  any  two 
days  together  within  the  last  twenty  years;  but  in  all  that  time 
would  buy  exactly  the  same  quantity  of  silver  that  the  gold  dollar 
would  buy. 

Fifth— In  view  of  all  the  foregoing  facts  and  circumstances, 
can  the  diligent  reader  discover  any  equality  of  functions,  effects 
or  influences  as  concerns  the  two  metals,  as  metals,  that  would 
justify  their  being  grouped  together  under  the  term  bimetalhsm? 
If  that  word  can  be  properly  applied  to  gold  and  silver  under 
the  present  conditions  of  their  use  in  the  money  system  of  this 
country,  then  the  word  has  no  important  economic  significance, 
for  the  fact  that  our  present  metal  token  dollar  is  made  of  silver 
has  no  more  to  do  with  its  value  than  if  it  were  made  of  tin  or 
zinc  or  copper,  or  a  compound  of  all  three  for  that  matter.  It 
would  be  just  as  reasonable  and  scientific  to  call  our  present 
system  a  quadro-metaUism  because  we  use  four  metals  altogether 
in  the  different  denominations  of  om-  money;  and  it  is  not  going 
beyond  the  limits  of  exact  statement  of  fact  to  say  that  the  value 
of  copper  in  the  mai'kets  of  the  world  has  just  as  much  (influence 
upon  either  the  purchasing  or  paying  power  of  our  one-cent  pieces 
as  has  that  of  silver  metal  upon  our  silver  dollar.  The  difference 
in  legal  tender  between  tlae  dollar  and  cent  pieces  has  nothing 


PRINCIPLES    OF    MONEY    AND    COINAGE.  83 

whatever  to  do  with  ihe  quantity  of  property  or  hibor  the  citizen 
must  give  for  either. 

The  joining  of  free  coinage  and  legal  tender,  which  must  be 
done  in  every  trulj'  standard  coin,  insm'es  two  results:  First,  that 
the  seller  of  commodities  shall  receive  that  price  Avhich  a  com- 
parison of  his  goods  with  a  given  quantity  of  metal  which  is 
free  to  go  in  and  out  of  all  the  markets  of  the  world  will  afford 
to  him;  and,  second,  that  the  money  thus  obtained  (if  in  standard 
coin)  will  pay  any  debt  he  may  owe. 

The  Ratio  of  Coinage.      The  first  preliminary  to  the  inaugu- 
ration of  bimetallism  is  to  determine  how  much  metal  shall  be 
put  into  the  coins  respectively.    As  we  have  no  gold  dollar  coins 
now,  it  is  more  precise  to  say  that  the  first  task  is  to  select  a 
dollar  quantity  of  each  metal,  and  the  ratio  of  comparison  of 
weights  between  those  qtiantities  constitutes  the  ratio  of  coinage. 
This  is  not  a  task  to  be  arbitrarily  and  recklessly  performed,  for 
we  have  seen  that  value,  the  all  important  element  in  the  whole 
money  problem,  is  not  a  thing  created  directly  by  legislative  en- 
actment.    Congress  can  only  increase  or  decrease  value  by  acts 
conforming  to  the  great  natural  laws  of  value.     Hence  in  deter- 
mining the  ratio  for  bimetallic  coinage,  we  must  go  into  the  mar- 
kets of  the  world  and  ascertain  in  what  ratio  the  metals  exchange 
for  each  other  in  the  natural  operations  of  commerce.     If  one 
have  artificial  aids  by  legislation  or  custom  in  any  particular  mar- 
ket, proper  allowance  must  be  made  for  that.     If  the  other  be 
subjected  to  special  disabilities  by  custom  or  law  in  any  particu- 
lar market  or  generally,  allowance  must  be  made  for  that.     It  is 
the  average  world  wide  ratio  when  on  a  basis  of  perfect  equality 
that  we  seek.    When  found,  or  the  nearest  approximation  can  be 
ascertained,  then  that  is  the  ratio  for  bimetalMc  coinage.     If  it 
be  found  that  one  pound  of  pure  gold  metal  be  the  average  equiv- 
alent in  exchange  for  fifteen  and  a  half  pounds  of  pure  silver 
metal,  at  the  time  of  inaugiu-atiug  the  coinage,  then  such  is  the 
proper  ratio  for  coins;   and  if,  as  in  the  United  States,  we  make 
a  standard  gold  dollar  of  a  certain  number  of  grains  of  pure  gold, 
then  we  must  put  just  fifteen  and  a  half  times  as  many  grains  of 
pure  silver  in  a  silver  dollar. 

When  bimetallic  coinage  was  first  inaugurated  in  the  United 
States  under  the  mint  act  of  1702,  the  ratio  adopted  was  one  of 
gold  to  fifteen  of  silver.  Afterwards,  in  1803.  France  adopted 
bimetallism  at  a  ratio  of  coinage  of  one  of  gold  to  fifteen  and  a 
li.'ilf  of  silver. 


84  PRINCIPLES    OF    MONEY    AND    COINAGE. 

In  1834  the  ratio  of  coinage  was  changed  by  congress  to  one 
of  gold  to  sixteen  of  silver  (15.98,  to  be  precise).  Notwithstanding 
the  long  discussion  of  the  subject  in  congress  and  the  many  able 
investigations  and  reports  of  committees  upon  the  subject,  the 
significance  of  an  open  French  mint  at  the  ratio  of  1:15  1-2  seems 
to  have  b6on  entirely  overlooked. 

The  adjustment  of  the  weights  of  the  standard  coins  to  the 
new  ratio  was  made  by  recoining  the  gold  coins  and  reducing  the 
amount  of  metal  in  them  about  G  1-4  per  cent.  The  weight  of 
pure  rhetal  in  the  silver  dollar  was  not  changed,  and  remains  to- 
day in  our  token  silver  dollar  just  as  it  was  in  the  standard  silver 
dollar  of  1792. 

The  result  of  this  change  dn  ratio  was  that  gold  became  the 
metal  in  use  in  standard  coins  and  silver  went  as  bullion  to  other 
countries.  This  tendency  of  silver  to  disuse  as  money  extended 
to  the  point  that  half-dollars,  quarters,  dimes  and  five-cent  pieces 
disappeared  and  there  came  an  embarrassing  dearth  of  small 
change  in  the  channels  of  trade,  for  here,  as  elsewhere  in  the 
commercial  world,  the  silver  metal  is  the  only  one  of  the  two 
adapted  to  such  uses  because  of  the  great  value  of  gold  as  com- 
pared to  its  bulk.  This  scarcity  of  change  occm*red  however 
from  the  fact  that  all  minor  silver  coins  up  to  this  time  were 
standard,  just  as  the  dollars  were,  contained  a  full  proportionate 
amount  of  metal  with  the  dollars  and  were  made  by  free  coinage. 
To  preserve  the  silver  change  at  home,  congress  in  1858,  closed 
the  mints  to  the  free  coinage  of  smaller  silver  pieces,  reduced 
the  amount  of  metal  in  them,  confining  their  coinage  to  the  mate- 
rial bought  by  the  government  for  that  purpose,  limited  their 
number  to  the  discretion  of  the  secretary  of  the  treasury  and 
thus  made  them  tokens. 

It  is  not  the  object  of  bimetallism,  as  will  be  hereafter  more 
particularly  set  fortli,  to  secure  an  absolute  parity  of  value  be- 
tween the  metals  at  the  coinage  ratio,  but  in  order  to  realize  its 
benefits  the  ratio  of  coinage  must  approximate  that  which  exists 
or  would  exist  between  the  metals  in  the  open  markets  of  the 
world,  where  neither  Inliored  under  any  special  or  artificial  legis- 
lative or  conventional  disability. 

Dm'ing  the  long  debate  upon  the  repeal  of  the  purchasing 
clause  of  the  Sherman  act  at  the  special  session  of  congress  in 
the  present  year,  numerous  propositions  were  made  to  change 
the  heretofore  existing  ratio  of  16  to  1,  and  in  the  House  votes 
were  taken  upon  the  ratios  of  17  to  1,  IS  to  1,  19  to  1  and  20  to  1. 


PRINCIPLES    OF    MONEY    AND    COINAGE.  85 

Singularly  enough,  though,  all  these  propositions  of  change  were 
predi^t^  upon  the  assumption  that  the  weight  of  our  gold  coins 
shouM  remain  as  they  are  and  the  silver  doUar  should  be  ad- 
justed to  them.  The  ratio  of  20  to  1  was  quite  popular  for  awhile, 
and  no  one,  to  the  knowledge  of  the  writer,  ever  suggested  that 
the  adjustment  of  the  coinage  to  such  new  ratio  should  be  made 
by  reducing  the  doUar  quantity  of  the  gold  metal,  rather  than 
increasing  that  of  the  silver  metal.  It  seems  not  to  have  been 
perceived  that  if  there  were  any  ground  of  equity  demanding  a 
change  of  ratio,  that  the  change  should  be  made  in  the  coin 
that  had  fluctuated  most  and  departed  fm-thest  from  the  general 
relation  of  value  it  bad  heretofore  sustained  toward  all  other 
property  and  toward  the  mass  of  existing  indebtedness. 

If  it  is  conceded  that  the  troubles  which  now  afflict  the  in- 
dustries and  commerce  of  gold  standard  nations  are  caused  by 
an  increase  in  the  value  of  gold,  the  standard  of  prices,  then  any 
readjustment  of  the  coinage  ratio  which  implies  the  continuing 
of  the  gold  coins  at  their  present  weight  of  fine  metal  is  merely 
robbery  approved  bj-  the  most  solemn  forms  of  legislation.  It 
being  first  ascertained  that  the  divergence  in  the  value  of  the 
metals  in  recent  years  is  almost  wlioUy  due  to  an  appreciation  of 
gold,  and  if  it  appears  that  because  of  great  and  permanent 
changes  in  the  relative  quantities  of  the  metals  being  produced 
in  the  world  gold  is  to  be  permanently  scarcer  in  the  future,  then 
a  change  of  ratio  for  bimetaUic  coinage  from  15  1-2  or  16  to  1,  to 
a  ratio  of  20  to  1,  would  be  imperatively  demanded  by  such  con- 
ditions. But  the  adjustment  of  the  coinage  to  stich  changed 
ratio  should  be  made  by  reducing  the  gold  dollar  quantitj'  of 
metal.  Every  consideration  of  justice,  sound  statesmanship  and 
common  honesty  would  demand  such  action,  under  the  state  of 
facts  here  assumed.  The  weight  of  our  standard  coins  after 
such  an  adjustment,  reckoning  on  pure  or  "fine"  metal,  of  coui'se. 
would  be  371 1-4  grains  of  silver  to  the  dollar  as  at  present, 
which  divided  by  20  would  give  18.56  grains  of  gold  for  the  dol- 
lar quantity  of  that  metal  instead  of  23.22  grains,  as  at  present. 

The  weight  of  best  opinion  in  the  world  however  upon  this 
matter  of  ratio  for  bimetallic  coinage  is,  that  there  is  no  existing 
good  reason  for  so  great  a  change,  nor  any  change.  The  precious 
metals  have  not  changed  in  their  relative  quantities  to  such  an 
extent  as  to  make  any  change  of  ratio  necessary.  The  former 
bimetallic  nations  of  Europe  coined  at  a  ratio  of  15  1-2  to  1,  while 
the  United  States  mints  were  open  at  10  to  1.    As  a  matter  of 


86  PRINCIPLES    OF    MONEY    AND    COINAGE. 

expedieiiL'y  mainly,  it  is  desirable  that  all  the  nations  which  have 
or  propose  to  have  a  bimetallic  coinage  should  adopt  the  same 
ratio.  But,  as  will  hereafter  appear,  this  is  not  essential  to  the 
realization  of  the  benefits  of  bimetallism. 

It  is  hardly  necessary  to  say  to  the  reader  who  has  carefully 
thought  out  the  subject  of  these  papers  up  to  the  present  point, 
that  a  ratio  of  coinage  between  token  and  standard  coins  is  a 
matter  of  no  economic  significance  whatever.  It  could  only  have 
a  practical  bearing  when  for  any  cause  the  standard  coins  should 
leave  the  channels  of  use  and  the  legal  tender  token  become  the 
standard.  Like  the  safety  catch  in  an  elevator  it  is  only  useful 
in  case  of  accident. 


PRINCIPLES    OF    MONEY    AND    COINAGE.  87 


TWELFTH  PAPEE. 


MONOMETALLISM  AND  BIMETALLISM  CONTINUED. 

More  of  Monometallism.  When  but  one  metal  is  admitted 
to  the  mint  for  free  coinage  without  limit,  so  long  as  specie  pay- 
ments prevail,  all  the  money  of  such  a  country  is  subjected 
wholly  in  point  of  its  value  to  the  fluctuations  of  that  one  metal. 
If  an  upward  fluctuation  takes  place,  either  by  reason  of  a  posi- 
tive lessening  of  the  production  from  the  mines  in  the  face  of  an 
increase  of  popvilation  and  property,  or  an  increased  demand 
upon  existing  stocks  of  the  metal  by  the  adoption  of  it  alone  by 
some  nations  which  have  heretofore  used  tiie  other  metal,  or 
both  metals,  for  standard  money  purposes,  such  event  will  be 
signalized  by  a  shrinkage  of  prices  and  a  general  lessening  of 
expected  returns  in  all  active  enterprises— a  general  increase  in 
the  burden  of  all  debts,  and  finally  widespread  paralysis  of  busi- 
ness and  a  condition  of  panic  and  bankruptcy. 

There  are  two  alternatives  of  relief  from  such  a  misfortune. 
The  first  is  to  recoin  the  standard  pieces,  reducing  their  weight 
of  fine  metal.  The  other  is  to  abandon  that  metal  as  a  standard 
and  .substitute  some  other  in  its  place.  The  first  remedy  is  an 
extremely  difficult  one  to  apply.  Because  of  the  peculiar  nature 
of  the  ills  suffered  and  the  great  difficulty  of  proving  their  pre- 
cise source,  the  process  of  reducing  the  weight  of  coins  would  be 
stoutly  resisted  by  all  that  powerful  class  who  benefit  by  the 
appreciation  of  the  standard  and  who  can  easily  make  it  appear 
to  tlie  mass  of  the  people  that  such  a  process  is  merely  a  method 
of  theft.  So  long  as  tlie  mass  of  even  fairly  intelligent  people 
believe  that  a  gold  coin  is  the  one  thing  in  all  the  wide  world 
that  has  a  fixed  value,  and  so  long  as  cabinet  ministers  and  mil- 
lionaire pamphleteers  in  the  most  solemn  ex  cathedra  manner  as- 
sure the  people  that  a  gold  coin  is  the  only  money  known  In  hu- 
man historv  tliaf  never  cheated  anybody,  the  task  of  correcting 


88  PRINCIPLES    OF    MONEY    AND    COINAGE. 

the  standard  by  the  menus  indicated  is  next  to  impossible.  The 
typical  individual  of  the  creditor  class  has  abundant  leisure  and 
ready  means  to  secure  proper  attention  to  his  interests  from  con- 
gresses, parliaments  and  crowned  heads.  The  farmer  in  his  field, 
who  to  do  his  best  can  only  run  a  dead  heat  with  a  ten  per 
cent,  mortgage,  has  no  time  nor  facility  for  studying  the  more 
intricate  features  of  the  money  question,  and  either  lacks  or  re- 
fuses to  exercise  the  power  necessary  to  protect  his  Interests. 
Wlien  congress  passed  the  funding  act  of  1871,  it  expressly  de- 
clared that  the  bonds  therein  authorized  should  be  paid  "in  coin 
of  the  present  standard  of  weiglit  and  fineness,"  thus  deliberately 
abdicating  its  constitutional  power  and  duty  of  "regulating  the 
value"  of  the  coins,  by  pledging  payment  in  certain  coins  regard- 
less of  their  value.  To  add  to  this  remarkable  exhibition  of  sub- 
serviency it  two  years  later  struck  out  of  existence  one  of  the 
standard  coins,  which  action  could  not  fail  under  the  operation 
of  economic  laws  as  certain  as  any  sequence  of  cause  and  effect, 
to  increase  the  value  of  the  remaining  one. 

But  the  object  of  these  papers  is  mainly  to  exhibit  principles 
and  leave  the  intelligent  reader  to  apply  them  for  himself  to 
past  or  current  events.  Any  attempt  to  equitably  adjust  the 
money  standard  by  reducing  the  weight  of  the  standard  coin 
would,  in  view  of  such  contracts  as  that  named,  meet  with  a 
charge  of  violation  of  plighted  faith,  repudiation,  etc.,  etc.  A 
nation  with  a  monometallic  standard  is  like  Mazeppa  bound  help- 
lessly to  the  back  of  the  Ukraine  .steed  io  be  carried  wherever 
fancy,  greed  or  fear  may  lead. 

The  remedy  which  bimetallism  affords  for  such  conditions  is 
applied  automatically,  and  that  fact  constitutes  the  chief  merit  of 
such  a  money  system. 

National  Bimetallism.  Tlio  distinction  which  Prof.  Laughlin 
makes  between  national  and  international  bimetallism  is  not  in 
itself  objectionable,  but  upon  tlie  other  hand  serviceable,  in  af- 
fording a  better  means  of  comparing  two  phases  of  that  system 
of  money.  The  criticisms  in  the  previous  paper  were  based  upon 
his  apparently  total  misconception  of  what  bimetallism  is. 

When  any  one  nation  accords  free  coinage  and  unlimited  legal 
tender  to  money  pieces  of  two  metals  at  a  ratio  approximating 
the  normal  market  relation  between  the  metals  and  without 
regard  to'tbe  ratio  that  may  characterize  the  coinage  of  any 
other  nation,  such  a  policy  may  properly  be  termed  one  of  na- 
tional bimetallism.     Siich    in  fact   has  been  the  only  phase  of  bi 


PRINCIPLES    OF    MONEY    AND    COINAGE.  89 

metallism  ever  realized  or  experienced  iu  the  United  States.  As 
heretofore  meutioued  when  the  United  States  mint  was  first 
established  and  opened  for  coinage  under  the  act  of  1792,  both 
silver  and  gold  were  admitted  to  free  coinage  at  the  ratio  of  15 
to  1;  and  the  resulting  coins  continued  in  concm-rent  circulation 
amongst  the  people,  at  the  least  up  to  the  year  1810,  and  to  a 
considerable  extent  for  several  years  after  that  date.  From  about 
the  year  1820,  gold  coins  had  ceased  to  be  used  to  any  great  ex- 
tent, and  the  silver  metal  became  the  sole  standard  of  the  mar- 
kets. This  condition  continued  until  1834,  when  congress  changed 
the  ratio  of  coinage  from  15  to  1  to  16  to  1.  That  is,  the  dollar 
quantity  of  gold  in  the  coins  was  reduced  1  1-2  grains,  which 
changed  the  gold  dollar  from  one-fifteenth  to  one-sixteenth  the 
weight  of  pure  metal  in  the  salver  dollar.  From  this  time  on  to 
the  suspension  of  specie  payments  at  the  beginning  of  the 
great  civil  war,  gold  instead  of  silver  was  the  measure  of  our 
markets  although  the  change  from  the  one  to  the  other  was  grad- 
ual and  not  characterized  by  the  least  shock  nor  slightest  dis- 
turbance to  the  business  of  the  country.  In  fact  gold  did  not 
entirely  replace  the  standard  silver  coins  imtil  about  1850,  after 
the  beginning  of  the  great  output  from  the  California  gold 
placers. 

.  The  importance  of  this  particular  matter  will  justify  a  fm*- 
ther  explanation  of  the  situation  at  the  cost  of  a  little  repetition 
of  what  was  said  in  the  next  preceding  paper  in  discussing  ratio. 

Concurrently  with  the  events  above  briefly  narrated  it  must 
be  considered  that  beginning  in  the  year  1803  the  French  mint 
was  all  this  time  open  to  the  free  coinage  of  both  gold  and  silver, 
with  full  legal  tender  at  a  ratio  of  15  1-2  to  1.  That  is  diu'ing  all 
this  time,  when  the  United  States  was  proposing  to  coin  both 
metals,  first  at  the  ratio  of  15  to  1  and  afterwards  at  a  ratio  of 
16  to  1,  the  French  mint  was  coining  at  a  ratio  of  15  1-2  to  1.  In 
France  one  could  have  20  francs  in  gold  and  20  francs  in  silver 
and  that  amount  of  their  silver  coins  were  just  15  1-2  times  the 
weight  of  the  gold  coin.  In  the  United  States  we  could  have  !p20 
in  silver  and  .$20  in  gold  and  the  $20  in  silver  was  just  16  times 
heavier  than  the  gold,  reckoning  pure  metal  in  every  case.  Now 
if  the  coins  of  the  two  metals  were  at  par  in  France,  circulated 
concurrently  and  were  freely  exchanged  the  one  for  the  other, 
with  free  coinage  of  both  prevailing  there,  an  United  States 
owner  of  silver  bullion  could  take  15  1-2  pounds  of  it  to  the  French 
mint,  have  it  coined  and  exchange  it  for  one  poinid  of  gold    nnd 


90  PRINCIPLES    OF    MONEY    AND    COINAGE. 

by  briiigin.i;-  his  oue  pouiul  of  jiold  to  the  United  States  mint  and 
haviug  it  coiued  Ue  could  exchaujje  it  for  lU  potiiids  of  silver  and 
have  a  half  pound  of  silver  for  his  profits,  less  the  expense.  This 
could  be  done  provided  the  metals  were  also  at  par  in  this  coun- 
try at  the  ratio  of  16  to  1.  The  difference  between  a  ratio  of 
15  1-2  to  1  and  16  to  1  is  a  difference  of  3  per  cent.— that  is  $3 
in  every  hundred,  $30  in  every  thousand,  $300  in  every  $10,000 
and  $3,000  in  every  $100,000.  This  it  will  be  readily  perceived 
is  a  good  margin  for  a  profitable  trade,  where  transactions  can 
be  made  so  rapidly  as  with  these  metals. 

But  under  the  conditions  above  assumed,  the  French  owner 
of  gold  would  have  the  same  motive  to  send  his  gold  to  the 
United  States,  have  it  coined  and  exchange  it  for  silver,  for  he 
could  get  3  per  cent,  more  silver  for  it  here  than  he  could  at  home. 
The  final  result  of  such  conditions,  if  they  could  exist  for  any 
great  length  of  time,  would  be  that  France  would  lose  all  her 
gold  and  the  United  States  all  her  silver. 

It  (is  really  not  necessary  to  suppose  that  the  coinage  of  the 
metal  would  be  necessary  in  effecting  these  exchanges,  for  stand- 
ard metal  and  standard  coin  of  the  same  metal  are  always  at  par 
at  the  mint  and  in  the  country  where  it  is  accorded  free  coinage. 

But  the  process  of  exchange  above  supposed  was  not  what 
really  took  place.  The  result  which  actually  succeeded  upon  the 
conditions  named  was,  that  the  par  of  value  between  the  metals 
ceased  in  the  United  States  while  it  was  substantially  maintained 
in  France.  United  States  owners  of  silver  would  no  longer  ex- 
change it  for  gold  at  the  ratio  of  16  to  1,  simply  because  they 
could  get  more  for  it  at  the  French  mint,  and  as  they  ceased  to 
make  that  exchange,  there  of  course  was  no  motive  for  the 
French  owner  of  gold  to  send  his  metal  here  for  such  purpose. 
There  was  also  a  lack  of  all  motive  on  the  part  of  the  United 
States  producer  or  owner  of  silver  to  offer  it  at  the  United  States 
mint  for  coinage  for  that  process  was  not  necessary  to  qualify  it 
for  export.  In  fact,  a  standard  metal  is  in  much  better  shape  for 
export  an  the  form  of  bars  than  in  the  form  of  coins. 

The  very  curious  student  of  the  subject  may  ask,  "Why  could 
France  maintain  the  parity  of  the  metals  at  her  ratio  of  15  1-2  to 
1  and  thus  attract  silver  from  the  United  States,  rather  than  the 
United  States  maintain  the  parity  at  16  to  1  and  attract  gold 
from  France?" 

There  arc  two  sufficient  answers  to  the  query,  either  of  which 
may  account  for  the  phenomenon. 


PRINCIPLES    OF    MONEY    AND    COINAGE.  91 

Fii-st— Where  the  mints  of  two  uatious  of  considerable  com- 
mercial importance  are  open  to  the  free  coinage  of  both  metals  at 
different  ratios,  the  one  having  the  ratio  most  nearly  approximat- 
ing the  actual  ratio  of  value  existing  in  the  open  markets  of  the 
world  will  secure  the  parity  and  maintain  it,  if  either  can  or 
does.  Subsequent  observations  have  demonstrated  the  fact  that 
the  French  ratio  was  more  nearly  the  actual  market  ratio  than 
that  of  the  United  States. 

Second— The  great  users  and  consumers  of  the  silver  metal 
for  centm-ies  have  been  the  people  of  Southern  Asia  and  the  East 
Indian  archipelago,  while  the  western  hemisphere  has  been  for 
the  same  length  of  time  the  great  producer  of  that  metal.  France 
lay  in  the  track  between  the  producer  and  the  greatest  consumer, 
and  had  besides,  during  a  greater  part  of  the  time  in  question 
a  preponderating  trade  and  influence  in  the  commerce  of  the  far 
east  to  say  nothing  of  her  contiguity  to  the  other  states  of  Eu- 
rope where  then  and  now  is  concentrated  the  international  ex- 
changes of  the  world.  The  simple  matter  of  international  com- 
mercial preponderance  would  determine  where  the  margin  was 
no  greater  than  three  per  cent.,  if  any  reason  beyond  that  first 
assigned  was  desired. 

Not  a  Failure.  Because  of  the  fact  that  the  bimetallic  coin- 
age laws  of  the  United  States  prior  to  1873  did  not  at  all  times 
secure  the  concurrent  use  of  the  coins  of  both  metals,  the  system 
has  been  pronounced  a  failure.  If  the  object  of  bimetallism  Is 
only  to  secure  so  trifling  a  matter  as  the  continuous  and  equal 
use  of  money  of  two  different  colors,  then  it  was  a  failure.  If 
monetary  science  has  no  more  important  bearing  upon  human 
welfare  than  is  implied  in  the  color  or  name  of  the  metal  which 
a  people  may  use  as  a  standard  of  value,  then  students  of  the 
subject  had  better  burn  their  text  books  and  give  tlieir  attention 
to  something  of  greater  importance.  But  the  professed  scientists 
who  declare  the  former  bimetallic  laws  of  the  United  States  a 
failure  for  the  reason  above  given,  are  oblivious  to  the  one  great 
distinguishing  merit  of  the  system  and  its  basic  principles.  The 
first  and  cliief  object  of  bimetallism  is  to  secure  to  the  people 
through  longer  periods  of  time,  a  money  of  approximately  un- 
varying value  with  which  to  meastu-e  their  products  and  dis- 
charge their  contracts.  Not  the  same  dollar  with  us,  nor  the  same 
material  all  the  time,  but  a  dollar  of  the  same  value  all  the  time 
if  possible.  If  it  be  important  and  essential  to  justice,  if  not  to 
peace  and  good  order  in  society,  to  have  a  yard-stick  of  unvnry- 


92  PRINCIPLES    OF    MONE\    AND    COINAGE. 

ing  leugth  or  a  pouud  of  unvaiying  weight,  why  is  it  not  of 
equal  importance  to  have  a  dollar  if  possible  of  unvarying 
value  ? 

Imagine  for  one  moment  the  confusion  and  injustice  that 
would  be  wrought  if  our  yardsticks  should  vary  in  length  to 
the  extent  of  fifty  or  seventy -five  per  cent,  in  one,  two,  three, 
five  or  ten  years!  How  long  would  it  take  to  precipitate  the 
country  into  commercial  and  even  social  chaos,  if  our  pound 
weights  should  vary  even  to  the  extent  of  5  or  10  per  cent,  in  ten 
years?  Yet  it  is  the  testimony  of  very  competent  and  orthodox 
observers  that  in  recent  times  the  money  standard  has  varied 
more  than  one  hundred  i>er  cent,  in  the  com-se  of  a  few  years. 
The  only  circumstance  that  has  saved  society  in  the  more  ad- 
vanced commercial  nations  from  anarchy  as  a  result,  has  been 
the  difficulty  in  detecting  the  real  facts  of  the  situation  so  far 
as  the  large  majority  of  sufferers  are  concerned.  This  is  proba- 
bly another  case  where  "ignorance  is  bliss." 

So  far  from  a  concurrent  use  of  both  metals  at  all  times 
being  a  sine  qua  non  to  bimetallism  the  system,  as  a  system,  is 
based  fundamentally  upon  that  fact  of  human  nature  and  expe- 
rience known  as  Gresham's  law,  by  which  the  cheaper  money  will 
always  be  used  in  preference  to  the  dearer.  This  law  is  the 
basis  of  its  "compensatory"  featiu-e,  so  highly  commended  by 
many  of  the  most  accomplished  economists  of  the  present  and 
recent  times. 

The  Compensatory  Feature.  It  is  the  compensatory  feature 
of  bimetallism  which  is  the  great  factor  in  maintaining  stability 
in  the  money  standard.  When  the  mints  of  a  nation  are  open 
to  the  free  coinage  of  two  metals,  under  the  conditions  heretofore 
named  as  to  ratio,  the  cheaper  of  the  two  will  be  the  effective 
standard.  If  in  the  course  of  time  the  standard  metal  in  use 
rises  in  value  and  becomes  dearer  than  the  other  metal  at  the 
ratio  fixed,  then  it  at  once  tends  to  disuse  and  the  heretofore 
dearer  metal  begins  to  replace  it.  This  process  is  in  strict  ac- 
cordance with  Gresham's  law.  And  in  accordance  with  the  fun- 
damental value  formula  heretofore  considered,  so  soon  as  the 
dearer  metal  tends  to  disuse  because  of  its  comparative  dearness, 
that  very  disuse  tends  to  cheapen  it,  or  at  least  to  stay  its  rise. 
On  the  conti-ary,  the  increased  use  of  the  heretofore  cheaper 
metal  tends  at  once  to  stimulate  its  value,  and  thus  influences 
set  in  from  opposite  directions  which  tend  directly  and  in  a  most 


PRINCIPLES    OF    MONEY    AND    COINAGE.  93 

effective  manner  to  hold  the  two  luetals  in  equilibrium— at  one- 
ness—in point  of  that  all  important  attribute,  their  value. 

Illusti-ation.— The  manner  in  which  national  bimetallism  will 
secm-e  a  unit  of  money  of  less  varying  value  for  the  use  of  a 
people  than  where  that  unit  is  confined  to  one  metal,  may  be 
represented  to  the  eye  as  follows:  Take  a  pencil  and  draw  across 
a  piece  of  paper  from  left  to  right  a  serpentine  or  wave  line. 
That  will  represent  the  ups  and  downs  or  fluctuations  in  value 
of  one  of  the  metals.  Then  draw  another  such  line  across  the 
paper  in  the  same  vertical  space  as  the  first— that  is,  over  the 
first  line— and  so  arranged  as  to  cross  the  first  line  at  more  or  less 
frequent  intervals.  This  will  represent  the  fluctuations  of  the 
other  metal.  Now  take  the  pencil  and  draw  in  the  space  imme- 
diately below  these  lines  another,  representing  the  lower  line  of 
the  figm-e  presented  by  the  other  two.  That  is.  beginning  with 
the  lower  line  on  the  left  hand,  trace  its  counterpart  on  the  paper 
until  you  come  to  a  point  of  intersection  and  then  take  the  down- 
ward dip  of  the  other  line  and  so  on  to  the  end.  When  com- 
pleted it  will  be  observed  that  the  last  line  more  nearly  approxi- 
mates a  straight  line  than  either  of  the  others  taken  separately. 

This  is  the  figure  used  by  Prof.  W.  Stanley  Jevons,  a  late 
and  very  able  English  economist  and  is  an  apt  illustration  of  the 
subject. 

The  Automatic  Feature.  The  coming  and  going  of  the  money 
metals  in  a  couditiou  of  bimetallism  is  entirely  according  to  nat- 
ural laws,  and  no  artificial  force  or  restraints  are  required  or  im- 
plied at  any  stage  of  the  processes  nor  in  any  condition  possible  to 
arise.  There  is  no  scramble  for  the  metals  by  different  nations. 
If  one  goes  out  of  use  in  any  bimetallic  country  because  of  its 
rise  in  value,  it  goes  freely  and  with  a  godspeed  to  the  parting 
gTiest.  If  those  in  any  quarter  of  the  world  who  may  be  benefited 
by  an  increase  of  the  value  of  a  monej^  metal,  as  those  largely 
interested  as  debt  holders,  seek  to  monopolize  or  make  a  corner 
on  the  metal,  bimetallic  countries  at  once  let  go  of  it  and  use 
the  other.  When  it  can  again  serve  a  good  purpose  in  the  coun- 
try from  which  it  fled  or  was  drawn,  it  is  not  necessary  to  pm*- 
sue  it  and  capture  it  on  hostile  shores  and  drag  it  to  an  unwill- 
ing captivity.  It  will  come  itself  in  obedience  to  the  natural 
laws  of  commerce  which  are  vastly  superior  in  minuteness  of 
detail  and  in  the  beneficence  of  their  results  to  arbitrary  statu- 
tory enactments.  The  mints  of  a  bimetallic  country  are  always 
open  to  welcome  either  metal  whenever  it  is  offered.     The  auto- 


94  PRINCIPLES    OF    MONEY    AND    COINAGE. 

matic  action  of  bimetallic  laws  would  be  a  strange  contrast 
to  that  now  being  witnessed  on  the  world's  monetary  stage.  lu 
obedience  to  inspirations  imparted  from  the  caverns  of  tlie 
world's  creditors,  governments  are  grabbing  for  the  yellow  metal. 
The  cry  goes  up  from  the  dens  of  the  money  changers  in  all  the 
debt  ridden  nations,  "Hold  on  to  your  gold!"  It  is  to  their  profit. 
The  prompting  of  science  and  common  sense  is,  "Let  go  your 
gold."  No  disaster  could  be  greater  nor  more  deserved,  and  no 
disappointment  keener  to  the  debt  mongers  of  England  and  Eu- 
rope than  for  the  United  States  to  open  its  mints  to  silver  and 
dump  the  whole  mass  of  its  gold  upon  them,  if  the  laws  of  trade 
would  permit  it  to  go  thither.  Such  an  event  would  be  the  signal 
for  a  great  depreciation  of  that  metal  which  is  the  last  thing  they 
desire  or  hope  to  see. 

United  States  Experience.  During  the  bimetallic  era  in  the 
United  States,  althougli  for  a  part  of  that  time  silver  was  the 
sole  standard  in  use  and  during  another  part,  gold,  yet  never  at 
any  time  did  the  gold  dollar  and  silver  dollar  differ  in  value  to 
a  greater  extent  than  three  per  cent.  Although  we  used  the 
cheaper  of  the  two,  first  silver  and  then  gold,  the  cheaper  was 
never  but  three  per  cent,  under  the  dearer,  and  for  important 
reasons  it  may  justly  be  doubted  whether  there  was  not  at  all 
times  a  practical  par  between  the  metals  so  far  as  they  affected 
the  interests  and  transactions  of  all  except  those  who  transferred 
very  large  sums  at  the  chief  ports  of  international  trade.  It  was 
impossible  for  gold,  when  in  use  as  the  standard,  to  rise  above 
that  margin  of  three  per  cent,  as  compai'ed  to  silver,  for  if  it  had 
done  so  it  would  have  been  discarded  and  silver  would  have  sup- 
plied its  place  and  the  resulting  disuse  would  have  destroyed  the 
increased  value  of  the  gold.  It  was  impossible  for  silver,  when 
in  use  as  the  standard,  to  rise  above  the  margin  of  three  per 
cent,  as  compared  to  gold,  for  precisely  the  same  reasons.  And 
thus  was  equilibrium  in  value  between  the  metals  maintained 
and  a  comparatively  stable  measure  of  value  secured. 

French  Experience.  INI.  Micliol  Chevalier,  the  leading  French 
economist  of  the  time,  writing  in  58-57.  directed  the  attention  of 
the  creditor  class  to  the  great  probable  depreciation  of  gold  likely 
to  result  from  the  largely  increased  output  of  that  metal  which 
had  recently  occurred  from  the  mines  of  California  and  Australia. 
He  suggested  that  it  be  demonetized  and  for  justification  re- 
ferred to  the  fact  that  the  original  unit  of  value  of  France  was  a 
silver  franc  piece,  and  that  thus  l)y  logical  deduction  and  equita- 


PRINCIPLES    OF    MONEY    AND    COINAGE.  95 

ble  coustructiou  every  existiuy  cumr;iL-i  lo  pay  fraucs  moaut  a 
definite  weight  of  silver  metal  and  not  gold.  He  was  referring  to 
a  time  long  anterior  to  the  year  1803,  when  the  French  bimetallic 
system  was  inaugm-ated.  The  same  com-se  of  reasoning  applied 
to  om*  times  and  in  this  country,  if  sound  at  all,  would  establish 
the  justice  and  propriety  of  making  the  silver  dollar  of  371.25 
grains  fine  metal  the  sole  legal  tender  dollar  for  that  dollar  of 
that  weight  of  silver  metal  was  designated  as  the  unit  of  our 
money  system  in  the  original  act  of  1792.  But  this  historical 
reference  is  mainly  valuable  as  exhibiting  the  fact  that  in  the 
creditor's  estimation  it  is  the  cheaper  money  that  is  always 
"nasty"  and  "dishonest"  money,  no  matter  what  the  material  of 
it  nor  whether  it  is  cheaper  than  it  ought  to  be.  It  illustrates 
simply  a  trait  of  human  nature  and  not  a  principle  of  monetary 
science. 

But  M.  Chevalier  does  not  claim  a  greater  variation  than  4 
per  cent,  between  gold  and  silver  money  in  France  up  to  the 
time  at  which  he  wrote,  and  when  both  metals  were  being  freely 
coined  at  the  ratio  of  15  1-2  to  1.  This  was  at  a  time  too,  when 
the  full  effect  of  the  great  increase  of  gold  had  been  realized  in 
the  commercial  nations.  The  strong  probability  is  that  the  4  per 
cent,  of  that  writer,  if  not  a  matter  of  hearsay  entirely,  was  con- 
fined to  a  single  and  exceptional  transaction,  for  the  weight  of 
testimony  of  contemporaneous  and  subsequent  observers  is  that 
there  never  was  a  difference  of  value  between  the  metals  suffi- 
cient to  exclude  either  from  current  use  in  the  markets,  nor  to 
make  two  prices  on  any  commodity  in  France,  the  one  a  gold 
price,  the  other  a  silver.  Authoritative  statistics  do  sho-^  how- 
ever, that  there  was  a  greater  influx  of  gold  into  France  than  of 
silver;  and  that  silver  was  more  liberally  remitted  from  France 
than  gold.  But  the  prominent  historical  fact  as  a  whole  is  a 
triumphant  vindication  of  the  potency  of  bimetallic  laws  in  pre- 
serving parity  between  the  metals,  even  under  most  adverse  cir- 
cumstances. At  a  time  when  the  relative  output  of  gold  was 
much  greater  than  that  of  silver  in  more  recent  times,  bimetallic 
laws  held  the  metals  within  a  small  margin  of  the  point  of  parity, 
allowing  the  most  extreme  claim  in  that  respect  of  those  who 
advocate  the  monometallic  system.  Since  the  repeal  of  those  laws 
the  divergence  between  the  metals  has  now  reach(>d  a  maximum 
of  more  than  SO  per  cent. 

Nothing  Arbitrary.      Tlio  cirfful  reader  will  note  the  fad  that 
in  neither  monometallism   nor  bimetallism   is   there  any   attempt 


96  PRINCIPLES  OF  MONEY  AND  COINAGE. 

to  fix  values  or  regulate  value  directly  by  law.  The  former  can- 
not be  done.  In  bimetallism  the  regulation  of  the  value  of  stand- 
ard money  is  by  appeal  to  natural  laws  in  automatic  action.  In 
monometallism  such  regulation  must  be  by  positive  statutory  en- 
actment, if  done  at  all,  with  all  the  friction  and  confusion  that 
such  a  course  necessitates.  As  a  matter  of  fact,  under  the  latter 
system  no  regulation  whatever  is  practicable.  An  appreciating 
money  standard  must  and  will  impoverish  the  masses  of  the  peo- 
ple, and  for  the  evidence  we  need  only  look  out  over  our  own 
land  at  this  time.  We  are  reaping  the  bitter  fruits  of  gold  mono- 
metallism. The  effects  are  cumulative.  Prices  have  gradually 
declined.  The  process  of  destroying  commerce  and  industry  has 
been  quite  like  that  of  murdering  the  recalcitrant  by  a  reputed 
device  of  the  Inquisition  where  the  stone  walls  of  a  cell  were 
made  to  close  upon  the  occupant  by  slow  and  almost  impercepti- 
ble degrees,  impelled  by  a  powerful  but  hidden  enginery. 


PRINCIPLES  OF  MONEY  AND  COINAGE 


thirtee:s'th  paper. 


INTERNATIONAL   BIMETALLISM. 

"NVlieu  two  or  more  nations  agree  upon  a  ratio  for  tlie  free 
coinage  of  two  metals  into  monej'  piece?  witli  unlimited  legal 
tender  to  the  coins  of  each  and  open  then  mints  to  such  coin- 
age, that  constitutes  wliat  is  technically  linown  as  international 
bimetallism.  Here,  as  in  national  bimetallism,  there  must  be  ab- 
solute impartiality  in  tlie  treatment  of  the  metals  by  government. 
The  mints  are  merely  opened  to  receive  and  coin  the  metals 
whenever  and  by  whomsoever  offered.  Any  tariff  placed  upon  either 
metal,  or  any  other  discrimination  favorable  to  the  one  at  the  ex- 
pense of  the  other,  breaks  the  par  of  value  between  different  lots 
of  bullion  of  the  same  metal  and  at  the  same  time  necessarily 
destroys  the  par  of  value  between  the  coins  and  some  portion  at 
least  of  the  metal  of  which  they  are  made.  It  creates  a  local, 
conventional  or  conditional  value  in  the  coins,  Avhich  is  the  very 
thing  that  the  fundamental  theory  of  standard  coin 
money  will  not  tolerate.  Illustration.— If  the  mints  of  the 
United  States  were  opened  to  both  gold  and  silver  and  a  high 
tariff  were  imposed  upon  importations  of  gold,  all  our  gold  coins 
woidd  at  once  become  tokens  subsidiary  to  the  silver  standard 
and  governed  in  their  exchange  value  by  that  of  the  standard 
silver  coins.  If  silver  .should  rise  in  value  with  a  general  rise  in 
that  metal,  tlie  gold  coins  would  rise  with  them,  and  thus  would 
cease  their  relation  of  parity  toward  the  gold  coins  which  issue 
from  the  "free  mints  of  other  nations  and  also  Avitli  the  mass  of 
that  metal.     The  result  would  be  silver  monometallism. 

The  metals  must  be  absolutely  free  to  come  and  go  at  the  will 
of  their  owners.  Any  restriction  of  any  nature  whatsoever  placed 
upon  either  destroys  the  compensatory  features  of  the  system 
which  is  its  one  great  and  distingulshnig  merit.  If  a  dam  or 
dj'ke    was    built   across   Boston    harbor    at   its   nnrrowosf    outer 

4 


98  PRINCIPLES    OF    MONEY    AND    COINAGE. 

limits  reacliiug  above  the  liigli  tide  marlc,  it  wordd  not  only  cease 
to  be  a  liarbor  but  the  level  of  the  water  inside  would  be  deter- 
mined by  altogether  different  laws  and  circumstances  than  those 
which  govern  the  sea  outside.  The  water  could  rise  to  a  great 
height  inside  regardless  of  the  proper  sea  level;  and  the  harbor 
might  become  a  parched  sandbank  despite  the  abundance  of 
water  in  the  ocean. 

Many  suggestions  have  been  offered  recently  injecting  new 
and  heretofore  unheard-of  conditions  into  the  coinage  problem. 
They  generally  come  from  persons  who  have  failed  to  grasp  the 
fundamental  principles  necessarily  involved.  It  is  sufficient  to 
say  that  if  the  metal  money  of  a  country  is  not  to  be  anchored  in 
point  of  its  value  to  the  world's  mass  of  that  metal,  then  there 
is  no  longer  a  standard  metal  money  in  the  true  and  scientific 
sense,  for  the  fact  that  it  is  made  of  metal  is  no  longer  of  any 
broad  economic  significance.  Paper  money  supplemented  by 
tokens  of  the  cheapest  suitable  and  available  metal  is  much  to  be 
preferred. 

The  fundamental  conditions  of  bimetallism  are  very  simple, 
easily  understood,  and  will  not  bear  variation.  Fix  the  ratio,  open 
the  mints,  clothe  both  coins  with  equal  legal  tender  and  then, 
laissez  fa  ire— let  them  alone. 

The  Object  of  International  Bimetallism.  The  condition  of 
international  agreement  and  concert  of  action  is  insisted  upon  by 
many  as  it  assiu-es  a  greater  certainty  as  to  the  parity  of  the 
metals  and  consequently  their  concurrent  use  at  all  times  by  the 
nations  parties  to  the  compact.  With  such  agreement  and  con- 
cert of  action  both  of  these  results  are  reasonable  expectations. 
They  may  in  fact  be  considered  certainties,  particularly  if  the 
nations  concerned  be  of  the  foremost  nations  in  point  of  popula- 
tion and  commerce.  The  object  of  international  agreement  is 
to  involve  as  large  a  mass  of  people,  of  property  and  commodi- 
ties and  of  the  metals  as  possible.  The  ultimate  object  of  a  con- 
siderable and  very  influential  class,  the  world's  creditors,  is  to 
put  about  the  system,  if  bimetallism  be  restored  at  all,  every 
possible  safeguard  against  a  drop  in  the  purchasing  power  of 
money,  which  in  their  chronic  and  unreasonable  fear  they  think 
must  be  inevitable  in  every  change  of  standard  in  a  condition  of 
national  bimetallism.  It  may  be  considered  by  some  as  a  singular 
fact  that  very  rich  men  are  never  distinguished  for  the  posses- 
sion of  the  judicial  faculty  and  yet  it  is  easily  accounted  for  upon 
philosophical  principles.     In   this  very   mercantile   and   material 


PRINCIPLES    OF    MONEY    AND    COINAGE.  99 

age,  a  keen  perception  and  appreciation  of  tlie  equities  is  an 
obstacle  to  the  acquirement  of  great  wealth.  Only  those  who 
are  by  nature  education  or  habit  somewhat  blind  to  every  inter- 
est except  their  own  and  to  every  person  except  themselves, 
make  the  great  successes  in  life,  in  a  material  sense.  Hence 
as  a  rule  rich  men  should  not  be  judges  nor  legislators.  The 
same  can  be  said  of  dishonest  poor  men. 

How  Parity  is  Achieved.  Prof.  W.  G.  Sumner  of  Yale  Col- 
lege is  upon  record  as  saying  that  international  bimetallism  is 
impossible,  no  matter  how  many  nor  how  important  the  nations 
which  join  in  the  agreement.  This  was  not  given  in  a  tentative 
form  but  in  the  most  positive,  unconditional  and  dogmatic  lan- 
guage. An  English  writer  of  great  industry  if  not  of  wide 
celebrity,  is  equally  positive  as  to  the  impossibility  of  the  scheme 
and  assigns  for  a  reason  that  gold  and  silver  are  not  and  cannot 
be  produced  upon  exactly  parallel  lines  of  cost,  and  hence  cannot 
move  along  in  time  on  precisely  parallel  lines  of  value.  Relative 
values  he  asserts,  after  Ricardo  and  many  later  economists,  are 
determined  by  cost  of  production;  and  as  16  ounces  of  silver  can 
never  be  produced,  or  for  any  great  length  of  time  at  the  same 
cost  as  one  ounce  of  gold,  they  cannot  for  any  great  length  of 
time  have  the  same  value. 

Reference  has  been  made  in  a  previous  paper  of  this  series  to 
the  subject  of  cost  of  production  and  attention  directed  to  a 
necessary  difference  in  the  meaning  of  the  word  "production" 
as  applied  to  the  precious  metals  and  as  applied  to  the  cereals 
and  a  host  of  other  things.  It  has  an  important  bearing  upon 
the  point  under  discussion.  But  it  will  not  be  necessary  to  repeat 
it  here  nor  enter  into  a  prolix  argument  upon  the  point.  The 
whole  gist  of  the  matter  can  be  presented  in  the  following: 

Hypothesis. — Suppose  all  the  nations  of  the  world  entered  into 
a  bimetallic  agreement.  This  agreement  then  would  comprise 
all  the  people  in  the  world  and  all  the  gold  and  silver  in  the 
world.  An  essential  condition  in  this  agreement  is  that  all  will 
use  both  metals  for  money  purposes  so  long  as  they  are  at  par 
in  value,  and  if  they  diverge  in  value  at  any  time,  all  will  cease  to 
use  the  dearer  and  center  the  money  uses  upon  the  cheaper 
(Gresham's  law).  Now  as  the  money  uses  of  each  metal  are  the 
cause  of  not  less  than  50  per  cent,  of  its  value  (Jevons  piits  it  at 
over  50),  then  we  have  the  following  conditions:  If  either  metal 
rises  in  value  sufficient  to  destroy  its  practical  parity  with  the 
other  in  money  uses   it  loses  half  its  value  by  being  discarded  as 


100  PRINCIPLES    OF    MONEY    AND    COINAGE. 

money.  If  either  metal  falls  iu  value  the  same  results  would 
be  necessarily  implied  toward  the  other.  But  how  can  the  dearer 
metal  be  50  per  cent,  cheaper  than  the  other V  If  it  were  possible, 
then  Ave  could  have  this  remarkable  equation:  Plus  3  per  cent, 
equals  minus  50  per  cent.  So  the  "impossibility"  of  international 
bimetallism  resolves  itself  into  a  bald  abstu-dity. 

This  theoretical  demonstration  is  however  entirely  unneces- 
sary to  the  practical  man.  He  knows  it  can  be,  because  it  has 
been.  France  alone  maintained  the  parity  between  the  metals 
accurately  enough  for  all  practical  business  purposes  for  more 
than  sixty  years,  and  under  the  most  unfavorable  circumstances 
as  concerned  the  relative  quantities  of  the  metals  produced  in 
that  period. 

A  More  Important  Matter.  The  possibility  of  international 
bimetallism  is  no  longer  seriously  questioned.  But  is  it  prac- 
ticable, and  is  it  desirable? 

Is  it  a  reasonable  expectation  that  any  considerable  number 
of  the  leading  nations  can  effect  such  an  agreement  in  view  of 
the  intensity  of  national  and  race  prejtidices  and  of  existing  com- 
mercial jealousies?  While  the  mere  fact  of  such  an  agreement 
or  concert  of  action,  if  based  on  just  conditions,  cannot  be  shown 
to  confer  any  advantage  upon  one  nation  to  the  prejudice  of 
another,  nor  to  deprive  any  one  nation  of  the  opportunity  to  se- 
cure a  commercial  advantage  over  a  competitor  in  some  imagin- 
able future  contingency,  yet  nations  are  very  loth  to  enter  into 
such  treaties  and  engagements. 

As  to  the  desirability  of  stich  an  agreement  upon  the  part  of 
the  people  of  the  United  States,  there  may  be  grave  doubts.  It 
would  depend  largely,  in  the  existing  emergency,  and  for  that 
matter  at  any  time,  upon  the  ratio  for  coinage  upon  which  stich 
agreement  could  be  effected.  The  point  of  danger  would  be  in 
adjusting  the  coinage  of  the  different  nations  to  the  new  ratio,  if 
a  radically  different  one  than  any  that  has  heretofore  prevailed 
in  national  coinages  should  be  found  essential  to  the  arrival  at 
any  agreement  whatever.  It  may  be  easily  foreseen  that  this 
last  is  a  matter  that  wiU  not  be  overlooked  in  such  a  conference. 
The  adjustment  of  the  coinage  to  the  new  ratio,  whether  it  be  a 
wide  departure  from  any  previously  existing  ratio  or  not.  is 
properly  a  matter  of  domestic  economy  only,  and  could  not  be 
surrendered  to  the  adjudication  of  an  international  commission 
without  abdicating  one  of  the  most  vital  functions  of  local  or 
national   government.        Illustration. — Suppose    an    international 


PRINCIPLES    OF    MONEY    AND    COINAGE.  101 

commission  should  agree  upon  a  ratio  of  say  '2i  to  1  as  the  proper 
one  aud  the  ouly  practicable  one  as  a  basis  for  interna tioual  bi- 
metallism. And  suppose  that  the  conference  further  agrees  that 
all  the  nations  concerned  shall  adjust  their  several  coinages  to 
this  new  ratio  by  leaving  their  gold  coins  as  they  are  now,  aud 
increasing  the  Aveight  of  metal  in  their  silver  coins  to  make  them 
24  times  as  heavy  as  the  gold.  On  behalf  of  such  adjustment  it 
may  be  urged  that  all  existing  contracts  for  the  payment  of 
money  in  all  the  uations  represented,  are  measured  by  and  paya- 
ble in  such  gold  coins,  or  in  other  coins  or  moneys  of  the  present 
value  of  such  gold  coins.  Hence  the  inauguration  of  interna- 
tional bimetallism  upon  such  an  adjtistment  of  the  ratio  would  be 
made  without  in  the  least  disturbing  existing  relations  between 
debtors  and  creditors  and  without  a  taint  of  repudiation  or  bad 
faith,  etc.,  etc.,  etc. 

All  this  sounds  pleasant  and  would  look  to  be  fair  to  more 
than  nine-tenths  of  the  people  who  have  made  no  special  study 
of  the  subject;  and  yet  it  involves  one  of  the  most  monstrous 
and  rapacious  propositions  that  ever  emanated  from  a  state 
council  in  the  dark  ages.  It  would  involve  an  adjudication  of 
the  rights  of  property  of  every  fariiier  planter  aud  other  property 
owner  and  taxpayer  in  the  United  States!  Are  they  willing  to 
submit  such  important  interests  to  the  determination  of  a  court 
made  up  of  aliens  in  blood,  political  inspiration  and  traditions 
and  perhaps  sitting  in  a  foreign  land? 

A  circumstance  of  great  moment  has  an  important  bearing 
upon  this  matter.  Little  or  no  European  stocks  or  bonds  are 
owned  by  American  citizens;  and  hence  we  have  no  reas>ni  to  be 
particularly  concerned  as  to  how  any  state  in  Europe  may  adjust 
its  coinage  ratio.  But  American  obligations  are  held  in  England 
and  Europe  to  the  amount  of  many  millions.  They  will  not  be 
so  indifferent. 

It  may  be  thought  that  the  foregoing  is  entirely  imaginary, 
and  that  the  people  have  nothing  to  fear,  as  any  agreement  made 
by  any  commission  must  be  ratified  by  congress  before  it  will 
become  effective.  Very  true,  but  since  many  propositions  have 
been  made  lately  in  our  congress  to  change  the  ratio  of  coinage, 
and  every  one,  so  far  as  my  knowledge  goes,  has  taken  for  grant- 
ed that  the  adjustment  would  be  made  by  increasing  the  weight 
of  metal  in  the  silver  dollar,  perhaps  the  danger  is  not  altogetlier 
imaginary  if  international  agreement  is  seriously  considered  as 
a  possibility.     After  all.  tlie  foregoing  is  only  a  suggestion  of  one 


102  PKINCIPLES    OP    MONEY    AND    COINAGE. 

of  the  mauj'  clearly  foreseen  obstacles  that  may  cause  thinking 
and  well-informed  people  to  regard  the  whole  matter  as  an  en- 
tirely visionary  scheme. 

Experience  is  worth  something.  Pour  international  confer- 
ences have  already  been  held  in  which  the  United  States  was  rep- 
resented. The  first,  that  of  1867,  had  an  important  influence  in 
precipitating  the  existing  financial  woes  upon  all  the  nations 
which  accepted  its  fatal  recommendations;  and  the  other  three 
have  utterly  failed  to  make  the  slightest  progress  toward  rem- 
edying the  blunder  or  the  crime,  which  ever  it  was.  As  an  indi- 
cation of  the  want  of  progress  upon  the  subject  (and  it  will  serve 
to  correct  a  popular  misapprehension  as  well)  the  last  conference, 
which  assembled  at  Brussels,  was  not  called  to  deliberate  upon 
the  restoration  of  bimetallism  at  all.  The  language  of  President 
Harrison's  invitation  was  simply  to  consider  "a  more  extended 
use  of  silver  in  the  currencies  of  the  world."  It  was  distinctly 
claimed  upon  the  floor  of  the  conference  that  bimetallism,  or  the 
free  coinage  of  both  gold  and  silver,  was  excluded  as  a  subject 
of  discussion  and  deliberation,  because  not  named  in  the  official 
programme  made  up  at  Washington.  If  the  fourth  conference 
has  not  yet  reached  the  subject  how  long  will  it  take  to  get  to 
the  proposed  agreement? 

A  reading  of  the  testimony  and  correspondence  embraced  in 
the  report  of  the  Lord  Herschell  commission  on  the  Indian  cur- 
rency question  will  exhibit  the  deep  regret  and  disappointment 
of  prominent  officials  of  the  English  government  in  India  that  the 
subject  of  bimetallism  had  not  been  submitted  to  the  Brussels 
conference. 

To  those  who  are  interested  in  this  particular  feature  of  the 
subject  (and  it  promises  to  be  more  prominent  in  the  near  future 
than  at  present)  there  are  two  considerations  worthy  of  reflec- 
tion. 

First— The  adjustment  of  our  national  coinage  to  the  ratio 
that  may  be  selected  by  international  agreement  must  be  left  to 
the  people  of  the  United  States  through  their  congress.  It  can- 
not properly  be  submitted  to  the  discussion  and  judgment  of  any 
council  of  foreigners  whatever.  It  involves  questions  of  domestic 
concern  only.  It  involves  questions  of  equity  and  morals  be- 
tween our  own.  citizens,  and  if  patriotic  pride  and  the  spirit  of 
independence  is  not  entirely  dead  in  this  land,  any  proposition 
to  turn  this  matter  over  to  the  adjudication  of  foreign  debt  mon- 
gers must  be  promptly  resented. 


PRINCIPLES    OF    MONEY    AND    COINAGE.  103 

Second— Since  when  did  the  United  States  government  lose 
its  power  to  do  all  the  necessary  legislating  upon  this  or  any 
other  subject,  which  the  welfare  of  our  people  demands?  We 
are  assured  day  by  day  by  a  powerful  and  influential  press,  and 
by  scores  of  politicians,  the  "degenerate  sons  of  noble  sires,"  that 
om*  government  "cannot  inaugurate  free  coinage  of  silver  and 
gold  alone."  We  must  asli  the  consent  or  co-operation  of  Eng- 
land or  some  other  nation  or  several  of  them.  Why  should  we 
ask  it?  They  are  not  explicit  in  their  answer  to  tliis  question. 
Not  one  of  the  whole  crew  has  ever  offered  an  answer  that  will 
bear  examination.  If  a  power  has  grown  up  in  the  world  in 
later  years  that  transcends  or  dominates  the  power  of  the  great- 
est nation  on  earth,  and  that  was  unknown  to  the  fathers  of  this 
republic,  let  it  be  described  and  named  and  pointed  out  in  precise 
terms.  There  may  be  a  power,  and  of  comparatively  recent 
origin,  which  aspires  to  universal  supremacy  in  all  fiscal  affairs, 
but  whj'  should  men  educated  to  liberty  voluntarily  bow  in  chains 
before  this  shoddy  potentate?  Whatever  of  good  is  possible  for 
human  laws  to  accomplish  is  possible  for  United  States  laws  to 
accomplish.  Gresham  was  an  Englishman,  but  neither  Gresham 
nor  England  made  Gresham's  law.  It  is  merely  a  fact  of  nature. 
Gravitation  is  not  Newton's  law,  but  nature's  law.  And  the 
United  States  government  can  adapt  and  conform  her  money 
legislation  to  nature's  laws  just  as  intelligently  as  any  nation  or 
aU  the  nations. 

Objections  to  Bimetallism.  The  grounds  upon  which  the  bi- 
metallic policy  is  combatted  are  very  limited  and  uncertain.  In 
fact  the  large  majority  of  the  most  tlioughtful  and  influential  of 
the  political  economists  of  the  world  are  bimetallists.  It  is  true 
that  many  who  occupy  chairs  of  political  "economy  and  social 
science  in  institutions  of  learning  have  sought  admission  to  the 
pages  of  magazines  and  the  columns  of  newspapers  to  denounce 
it  in  recent  years,  but  they  are  not  of  that  class  of  scientists  re- 
ferred to  above.  The  growth  of  what  in  recent  years  has  been 
called  the  money  power  and  which  toolc  root  in  the  "Funding 
System,"  which  is  scarcely  yet  two  hundred  years  old,  has  had 
an  important  influence  upon  the  teachings  of  political  science  as 
it  emanates  from  richly  endowed  chairs  in  the  great  colleges.  It 
may  seem  invidious  to  write  it,  but  is  nevertheless  true,  tliat  very 
often  the  teacher  of  science  is  nothing  more  nor  better  than  the 
hired  attorney  of  special  interests.  AVlienevor  tlie  University  of 
Penn.sylvania  comes  to  have  a  free  tnidc  professor  of  political 


104  PRINCIPLES  OP  MONEY  AND  COINAGE. 

economy,  or  a  text  book  not  specially  doctored  to  suit  the  local 
interests  of  a  few  citizens  of  that  state;  or  whenever  a  professor 
of  political  science  in  a  collejjfe  with  a  million  dollar  endowment 
fund  can  tell  the  whole  truth  about  the  Funding  System,  the 
study  of  true  science  will  be  elevated  and  dignified. 

First— A  common  objection  to  bimetallism,  and  especially  in 
its  national  form,  is  that  it  does  not  secure  an  absolute  parity 
between  the  metals  at  the  ratio  of  coinage.  Consequently  that 
it  does  not  secure  an  equal  and  concurrent  use  of  coins  of  both 
metals  at  all  times. 

Since  that  ft  not  its  scientific,  ultimate  and  equitable  object, 
the  objection  has  no  force.  It  is  equally  true  that  it  does  not 
make  the  hair  grow  on  bald  heads,  but  is  none  the  less  a  desira- 
ble thing.  If  it  is  more  desirable  to  have  an  oak  yardstick  than 
to  have  one  that  is  all  the  time  just  three  feet  long,  then  there 
is  something  reasonable  in  the  objection.  If  the  housewife  had 
rather  get  only  half  as  much  sugar  at  tlie  store  just  for  the  satis- 
faction of  having  it  weighed  out  to  her  by  a  brass  pound  weight 
instead  of  an  iron  one;  or  if  the  farmer  would  prefer  to  give 
three  bushels  of  Avheat  rather  than  one  to  pay  his  debt  or  taxes, 
just  for  the  sake  of  paying  it  in  a  gold  dollar  rather  than  a  silver 
dollar,  and  especially  when  he  only  sees  and  uses  the  same  i^aper 
dollar  in  either  case,  then  there  niny  be  some  common  sense  in 
the  objection. 

Second— It  is  alleged  that  the  phrase  "double  standard,"  which 
is  sometimes  applied  to  the  bimetallic  system,  is  a  contradiction 
of  terms.  That  the  word  "standard"  is  singular,  and  that  it  is 
impossible  to  measure  against  two  different  standards  at  the 
same  moment  and  if  we  could  we  could  not  arrive  at  a  single 
result.  This  phase  of  the  subject  is  very  confusing  to  some 
statesmen.  They  claim  to  have  minds  which  cannot  comprehend 
this  matter,  and  in  that  respect  the  claim  may  be  true. 

If  one  of  these  statesmen  should  go  into  a  cross-roads  store 
in  the  State  of  Kentucky  to  buy  a  web  of  his  favorite  blue  jeans 
where  the  storekeeper  had  two  yardsticks,  one  of  oak  and  the 
other  of  hickory  1:imber,  but  both  of  the  same  length,  he  would 
wonder  how  such  a  thing  could  be  possible.  He  would  be  mysti- 
fied exceedingly.  How  there  could  be  two  standards,  made  of 
tAvo  different  kinds  of  wood,  and  each  have  the  same  length 
would  appear  to  him  a  Avork  of  magic,  a  species  of  hocus-pocus, 
a  thing  incomprehensible.  Being  a  democrat,  or  thinking  he  is, 
because   of  the   peculiar    construction    of   his   peculiar   mind,   he 


piuxciPLES  uF  ^k)ni:y  and  coinage         lo:. 

would  have  liis  jeaus  measured  with  the  hiekory  timber  only. 
To  his  queerly  coustructed  mind  the  word  "leui^lh"  means  hiokory 
timber.  While  other  miuds  cau  couceive  of  space  or  extensiou 
separate  aud  apart  from  any  kind  of  timber,  he  caimot.  If  only 
hickory  timber  were  to  become  extiuct  theu  all  space  or  distance 
in  his  estimation  would  be  abolished. 

Now  suppose  that  this  storekeeper  should  discover  that  his 
hickory  yardstick  wotdd  occasional!}^  swell  and  stretch,  either 
from  being  dropped  into  the  whisky  barrel  or  for  some  other 
cause,  while  a  similar  accident  or  circumstance  had  no  such  effect 
upon  his  oak  yardstick,  but  ratlier  the  contrary  effect— created  a 
tendency  to  shrink.  A  happy  thought  occtirs  to  him,  for  he  is 
a  just  man  and  loves  equity.  He  takes  the  two  yardsticks  and 
glues  them  together  aud  makes  what  he  calls  a  bi-Iigneous 
standard  for  yard  meastu-e.  The  stretching  tendency  of  the  one 
is  counteracted  by  the  shrinking  tendency  of  the  other,  and  the 
result  is  an  unfluctuating  yardstick.  He  would  probably  lose  the 
custom  of  the  Kentucky  statesman,  but  would  gain  a  reputation 
for  fair  dealing. 

We  have  brass  pieces,  iron  pieces,  bronze  pieces  and  composi- 
tion pieces,  each  of  which  we  call  a  '•pound"  weight.  Tlie  use  of 
these  various  pieces  throughout  the  country  does  not  imply  that 
we  have  as  many  different  pounds  (meaning  the  degree  of  specific 
gravity  which  constitutes  the  pound)  as  we  have  pieces  of  metal, 
but  rather  that  each  piece  possesses  the  same  specific  gravity. 
When  we  use  the  brass  piece  on  the  balance  we  are  not  compar- 
ing our  goods  or  measm-ing  them  against  brass,  but  measuring 
it  against  a  certain  heft,  weight  or  specific  gravity  of  the  brass 
piece.  The  material  of  these  pieces  is  of  little  or  no  importance, 
except  in  point  of  convenience,  but  the  heft  or  heaviness  is  the 
essential  matter.  Is  it  then  true  that  because  we  have  four  or  five 
or  more  different  kinds  of  metal  pound  weights  in  the  United 
States  that  we  have  as  many  standards  of  weight? 

To  avoid  the  state  of  confusion  which  reigns  in  tlio  minds  of 
the  Kentucky  statesman,  we  must  however  bear  in  mind  tliat 
heaviness  and  value  are  not  in  all  points  strictly  analogous. 
Weight  is  constant  and  value  is  changeable.  When  we  contract 
in  terms  of  "pounds"  this  year  we  know  that  the  weight  of  the 
pound  will  be  the  same  next  year.  When  we  contract  in  terms 
of  "dollars"  we  have  no  assurance  that  the  value  of  dollars /will 
be  the  same  next  year.  Bimetallism  is  a  device  to  increase  the 
probnl)ility    that   they   will   be   of   the   same   value   from   yonr   to 


lOG  PRINCIPLES    OF    MONEY    AND    COINAGE. 

year.  When  we  contract  this  year  in  view  of  a  dollar  of  a  certain 
value  we  want  the  dollar  with  which  we  are  required  to  fulfill 
that  contract  next  year    to  have  the  same  value. 

Is  there  anything  unjust,  wicked  or  scandalous  in  that? 

Third— A  third  objection,  and  one  having  some  real  founda- 
tion in  economic  fact,  is  this:  That  whether  in  the  national  or 
international  form,  bimetallism  makes  the  cheaper  metal  the 
controlling  factor  in  determining  the  measure  of  values.  In  a 
case  of  national  coinage  only,  if  one  of  the  metals  shall  for  any 
cause  develop  a  tendency  to  fall  in  value,  it  will  become  the 
standard  and  the  value  of  all  money  is  thus  depreciated.  In  the 
case  of  international  coinage,  even  if  any  number  of  nations 
should  join  in  the  compact,  a  persistent  decline  in  either  of  the 
metals  will  drag  the  othex  with  it,  though  they  still  maintain  a 
practical  parity,  and  thus  in  any  and  every  event  those  who 
benefit  by  the  cheapening  of  money  have  most  of  the  chances  in 
their  favor. 

This  is  all  true  and  the  objection  must  stand  for  all  it  is 
worth.  To  exhibit  the  matter  more  precisely,  the  creditor  class 
and  those  who  have  fixed  incomes  under  a  condition  of  interna- 
tional bimetallism  cannot  profit  by  a  fluctuation  of  the  money 
standard,  except  there  be  an  advance  in  the  general  value  of 
both  the  metals;  while  all  others  may  reap  at  least  a  temporary 
benefit  by  an  absolute  fall  of  either  one. 

To  all  of  this  the  answer  is,  that  inasmuch  as  no  money  of 
fixed  value  has  ever  yet  been  invented,  and  as  an  upward  fluctu- 
ation benefits  the  few  at  the  expense  of  the  many,  while  a  down- 
ward fluctuation  benefits  the  many  at  the  expense  of  the  few, 
therefore  the  greatest  good  to  the  greatest  number  demands  that 
system  of  money  in  whieli  the  probability  of  a  downward  fluctu- 
ation predominates.  If  legislation  upon  tliis  subject  is  but  the 
assignment  of  chances  to  this  or  that  class — and  it  is  largely  so — 
then  it  is  entirely  in  accord  with  democratic  institutions  to  give 
to  the  majority  of  persons  the  majority  of  the  chances. 


PRINCIPLES    OP    MONEY    AND    COINAGE.  107 


FOUETEENTH   PAPER. 


"FREE"  COINAGE  OF  THE  AMERICAN  PRODUCT— THE 
GREAT  FALL  OF  PRICES  AND  THE  CONSEQUENCES— 
THE  REMEDY— THE  CONSTITUTIONAL  POWER  AND 
DUTY  OP  CONGRESS  IN  THE  PREMISES. 

It  has  been  frequently  suggested  within  a  few  years  past  that 
the  free  coinage  of  the  United  States  silver  product  only  would  be 
a  happy  solution  of  the  vexed  coinage  question  and  one  entirely 
in  harmony  with  the  long  practiced  fiscal  policy  of  our  govern- 
ment, whereby  the  whole  people  are  taxed  for  the  benefit  of  a 
few.  Since  the  so-called  "protection"  policy  has  been  long  main- 
tained mainly  upon  a  sentiment  of  hate  or  spite  toward  England, 
regardless  of  all  considerations  touching  its  economic  soundness 
and  the  effect  upon  ourselves,  and  as  England  is  gold  monometal- 
lic in  her  money  policy  and  unfriendly  to  the  use  of  silver  for 
standard  money  pm-poses,  this  seems  a  good  opportunity  to  brace 
up  the  silver  metal  on  such  protective  theory.  In  addition  to  this, 
the  manufacturing  barons  propose  to  ally  to  them  more  closely 
the  silver  barons  by  giving  the  latter  "some  of  the  pork." 

It  is  hardly  necessary  to  say  to  the  intelligent  reader  that  this 
idea  of  free  coinage  is  a  total  misconception  of  tlie  cliaracter  and 
purpose  of  the  economic  money  policy  which  bears  that  name. 
The  proposition  netessarily  implies  the,  total  exclusion  of  all  for- 
eign silver,  either  by  a  prohibitive  tariff  or  by  some  other  act 
making  foreign  metal  contraband.  A  few  of  the  more  palpable 
objections  to  such  a  policy  are  presented  as  fallows: 

First— It  would  not  change  in  any  feature  or>Kiuality  our 
present  silver  dollar.  It  is  now  a  mere  tolien  and  would  continue 
to  be  so.  Like  our  nickel  pieces  and  paper  dollars  it  would,  for 
the  time  being  at  least,  have  a  value  equal  to  gold  within  our 
borders  and  a  very  different  one  outside.  Like  the  present  silv(^r 
dollar  and  tlio  coppors  nnd  nickels   and  paper  dollars   It  would  be 


lOS  PRINCIPLES    OF    MONEY    AND    COINAGE. 

entirely  subsidiarj'  to  the  gold  coins,  rising  in  valne  as  they  rise 
and  falling  as  they  fall,  and  would  not  in  any  sense,  near  or  re- 
mote, seciH'e  the  smallest  featm-e  of  a  true  and  scientilic  bimetal- 
lism. 

Second— If  at  all  practicable,  it  would  inaugurate  a  policy 
with  reference  to  token  money  coinage  which  would  become  very 
offensive  to  the  people  of  the  whole  country  when  they  came  to 
understand  it. 

There  is  a  very  large  profit  in  the  coinage  of  tokens,  and  here- 
tofore that  profit  has  accrued  to  the  public  treasury— to  the  whole 
people.  To  permit  the  producers  of  the  particular  material  used 
for  such  purposes  to  pocket  the  profit,  with  no  recompense  in  any 
shape  to  the  ptiblic  therefor,  would  be  a  job  that  would  smeU  to 
heaven.  Just  as  well  may  congress  allow  the  owners  of  the  one 
American  nickel  mine  the  'free"  coinage,  to  the  extent  required, 
of  their  product  into  5-cent  pieces;  and  to  the  owners  of  copper 
mines  the  "free"  coinage  of  their  metal  into  1  and  2-cent  pieces, 
to  the  extent  that  the  secretary  of  the  treasury  might  think  it 
necessary  to  supply  the  country  with  tliat  kind  of  diange.  Only 
a  step  further  but  not  one  particle  different  in  principle,  congress 
might  allow  some  favorite  owner  of  a  paper  mill  to  have  "free" 
coinage  (printing)  of  his  product  into  $10  notes  made  legal  tender 
for  all  debts.  AVhat  a  bonanza  that  would  be!  There  have  been 
dishonest  kings  and  tyrants  in  the  past  who  sought  illegitimate 
profits  from  the  free  mints,  by  stealing  pure  gold  or  silver  from  the 
standard  coins  and  supplying  its  place  with  some  worthless  alloy 
or  not  supplying  it  at  all;  but  to  make  a  free  gift  of  the  profits  on 
token  coinage  to  favored  individuals  would  be  a  wrongful  act  of 
such  vast  proportions  as  to  be  without  a  parallel  in  even  medie- 
val times.  If  silver  possesses  exceptional  .merits  as  a  material 
for  token  coinage,  then  let  the  government  continue  to  purchase 
and  coin  the  required  amount  for  such  purposes,  and  turn  the 
profit  on  such  coinage  into  the  public  treasury  as  heretofore.  If 
it  does  not  possess  that  distinguishing  merit,  then  make  the  tok- 
ens of  something  else  and  something  cheaper,  so  the  profit  to  the 
treasiu-y  will  be  all  the  greater.  If  silver  is  not  needed  for  stand- 
ard money  it  is  not  needed  for  any  money,  for  alluminum  is  much 
more  appropriate  and  convenient  for  metal  tokens.  Coinage 
should  be  conducted  on  intelligent,  business-like  and  equitable 
principles. 

The  Great  Fall    in    Prices.      Economists,  with  scarcely  an  ex- 
f^eption   coincide   in   det<'Vinining   the   eras   in   the   i>ast  history   of 


PRINCIPLES    OF    MONEY    AND    COINAGE.  109 

the  world  wheu  great  fluctuations  iu  the  vahie  of  the  precious 
metals  have  occiu-red.  For  instance,  that  the  discovery  of  the 
western  hemisphere  at  the  close  of  the  Fifteenth  century  resulted 
in  a  vast  addition  of  both  gold  and  silver  to  the  treasiu'ies  and 
money  supply  of  Europe.  As  the  increased  quantities  of  these 
metals  cheapened  them,  prices  rose  in  all  the  commercial  coun- 
ti'ies  and  an  tmiversal  era  of  social  and  industrial  prosperity  was 
realized.  There  was  a  quickening  of  all  enterprise  and  a  stimu- 
lating effect  realized  iu  every  department  of  human  exertion.  As 
the  accumulated  stores  of  the  metals  in  the  newly  discovered 
Americas  became  distributed  all  over  the  world  and  because  of 
the  large  increase  in  the  mass  of  propertj-  as  a  direct  result,  and 
of  population  as  an  indirect  result,  there  came  a  time  again  of 
increasing  relative  scarcitj'  of  the  metals  for  money  supply.  That 
is,  instead  as  before,  that  property  and  products  would  command 
more  and  more  of  the  precious  metals  in  exchange,  the  metals 
wottld  command  more  and  more  of  products  and  property  as 
time  went  on.  General  prices  were  shrinking.  This  was  the 
condition  at  the  beginning  of  the  present  ceutm-y  and  continued 
to  be  the  general  rule  until  the  discovery  of  the  great  gold  de- 
posits of  California  and  Australia,  when  a  reverse  movement  in 
prices  set  in. 

The  fltictuations  of  the  value  of  the  metals  during  all  the 
time  referred  to  up  to  an  early  part  of  the  present  century  were  a 
restilt  of  entirely  natural  causes,  the  same  which  now  operate  with 
reference  to  those  products  of  human  industry  which  are  free  to 
flow  in  and  out  of  all  the  markets  of  the  world.  While  it  is  true 
that  prior  to  the  time  named,  the  rtilers  of  Spain,  which  country 
was  the  direct  and  primary  recipient  of  tlie  great  buUc  of  the  new 
treasure  from  the  new  world,  conceived  the  mistaken  idea  that 
the  nation  which  obtained  and  held  the  largest  quantities  of  gold 
and  silver  was  necessarily  the  richest  and  strongest,  made  laws 
arbitrarily  forbidding  the  export  of  the  metals  from  within  her 
borders,  such  laws  had  little  effect  in  restraining  the  movements 
of  the  metals.  But  about  the  year  1690,  there  arose  the  Funding 
System,  tlie  precursor  of  our  present  enormous,  complicated  and 
alarming  system  of  public  and  corporate  indebtedness.  This  had 
assumed  considerable  proportions  at  the  close  of  the  Napoleonic 
wars,  about  1816,  and  England  soon  after  demonetized  silver  and 
confined  the  measure  of  values  and  legal  means  of  payment  of 
large  amounts  to  gold  alone. 


110  PRINCIPLES    OF    MONEY    AND    COINAGE. 

It  is  a  singular  and  suggestive  fact  tliat  ttie  two  great  eras 
for  money  metal  demonetization  should  be  the  eras  of  greatest 
public  indebtedness— 1815  to  1820  and  1871  to  1875;  and  that  in 
case  of  England  and  the  United  States  it  should  be  accomplished 
at  a  time  when  coin  payments  in  all  private  transactions  were 
suspended. 

Following  the  recent  epidemic  of  silver  demonetization  and 
which  was  joined  in  by  the  United  States,  France,  Germany, 
Holland,  Italy,  Norway,  Sweden,  Denmark,  Belgium,  Switzer- 
land, Greece  and  the  Austro-Hungarian  empire,  and  lastly  India 
through  British  intervention,  there  set  in  a  world  wide  fall  in 
prices  which  has  persisted  for  20  years  and  with  no  definite  pros- 
pect of  cessation. 

In  saying  above  "world  wide,"  reference  is  made  to  aU  the 
nations  named  and  wherever  else  that  prices  are  measm*ed  by 
gold.  This  last  great  fluctuation  of  the  metals,  no  matter  whether 
altogether  a  rise  of  gold  or  partly  a  fall  of  silver,  was  not  occa- 
sioned by  natural  causes,  but  is  distinctly  due  to  artificial  and 
legislative  interference.  The  increased  demand  for  gold  occa- 
sioned by  the  centering  of  all  the  chief  money  uses  upon  that 
metal  in  so  many  of  the  chief  industrial  nations  has  caused  that 
metal  to  rise  in  value  as  compared  to  all  other  things;  and  as  it 
is  now  the  primary  measure  of  value  in  all  the  nations  named, 
prices  have  shrunk  proportionately. 

Another  Cause  Assigned.  While  a  lai'ge  majority  of  those 
favoring  a  single  gold  standard  concede  an  appreciation  of  that 
metal  as  a  result  of  the  causes  above  named,  yet  a  few  endeavor 
to  account  for  the  great  fall  in  prices  in  another  manner.  They 
assert  that  prices  have  fallen  because  of  a  lessened  cost  of  pro- 
duction following  the  introduction  of  modern  and  improved  meth- 
ods and  machinery  in  nearly  all  the  industries. 

The  principal  reasons  for  thinking  this  a  mistaken  view  are 
these: 

First — The  fall  in  prices  is  confined  to  gold  standard  counti'ies, 
while  all  nations  have  participated  more  or  less  in  the  advantages 
of  modern  improvements.  It  is  also  observed  that  in  southern 
Asia  and  in  the  islands  of  the  Indian  ocean,  where  there  has 
been  the  least  advance  in  improved  methods  of  production,  those 
countries  which  use  the  gold  standard  have  suffered  a  fall  in 
prices,  while  those  which  use  the  silver  standard  have  not,  but  on 
the  contrary  a  moderate  rise  in  the  general  scale. 


PRINCIPLES    OF    MONEY    AND    COINAGE.  Ill 

Second— "But,"  say  the  gold  monometallists,  "it  so  happens 
that  silver  has  declined  in  value  to  the  same  extent  as  other  com- 
modities and  from  the  same  cause,  and  this  accounts  for  the  fact 
that  the  value  relation  between  silver  and  these  other  things  re- 
mains about  the  same,  and  prices  quoted  in  silver  have  not 
changed."  This  is  a  remarkable  claim.  It  would  be  a  wonderful 
coincidence  if  true.  So  extraordinary,  in  fact,  as  to  strain  the 
faith  of  the  most  credulous.  We  are  asked  to  believe  that  the 
processes  of  producing  silver  from  the  mines  and  corn  and  wheat 
and  cotton  and  other  staple  products  of  the  fields,  had  all  of  them 
just  happened  to  be  cheapened  at  the  same  time  aud  to  the  same 
extent,  while  those  affecting  the  production  of  gold  have  not 
been  improved  nor  changed.  What  shaU  be  said  when  the  fact 
is  taken  into  account  that  gold  and  silver  are  to  a  very  large  ex- 
tent produced  from  the  same  mine,  in  the  same  rock,  with  the 
same  tools  and  machinery,  by  the  same  laborer,  by  the  same 
stroke  and  at  the  same  wages,  and  are  carried  to  the  same  smel- 
ter by  the  same  railroad  and  at  the  same  cost  of  freight.  They 
are  Siamese  twins  in  their  natural  state  in  the  rocks,  and  remain 
so  until  the  last  stroke  of  labor  is  delivered  in  their  production 
and  fitting  for  use,  which  is  that  of  the  refiner.  It  is  only  then 
that  they  are  divorced. 

The  Rise  of  Gold  and  Fall  of  Silver.  Even  if  it  could  be 
demonstrated  that  the  increased  production  of  silver  in  recent 
years  is  because  of  its  cheaper  extraction,  that  does  not  meet  the 
issue  presented  in  the  coinage  question.  Gold  can  have  appre- 
ciated in  value  even  if  silver  has  depreciated  because  of  its  greater 
plenty.  To  prove  that  silver  is  cheaper  is  not  proving  that  gold 
has  not  risen.  To  prove  that  silver  has  become  cheap  by  no 
means  avoids  or  refutes  the  charge  that  prices  have  fallen  be- 
cause of  a  rise  of  gold.  When  the  United  States,  France,  Ger- 
many and  all  the  other  states  named  abandoned  silver  for  stand- 
ard money  aud  vied  with  each  other  in  a  scramble  for  the  world's 
gold,  it  is  not  only  natural  but  inevitable  that  gold  should  rise 
in  value  and  that  prices  should  fall.  Just  that  thing  has  occurred 
and  the  consequences  are  before  intelligent  mankind  in  an  unpre- 
cedented prostration  of  industry,  bankruptcy,  idleness,  poverty 
and  a  threatened  disintegration  of  societ5^  That  is  one  probli»m. 
All  this  has  nothing  to  do  with  tlio  cheapness  of  silver.  That  is 
another  matter.  When  we  turn  to  consider  the  fate  of  silver,  we 
would  naturally  expect  a  large  actual  depreciation  of  that  metal, 
both  because  of  the  larger  production  and   its  abandonment  as 


112  PRINCIPLES    OF    MONEY    AND    COINAGE. 

staudard  mouey  by  these  same  uatious.  The  critical  observer  is 
astouislied  that  the  fall  of  silver  has  uot  beeu  greater.  Many 
are  puzzled  to  account  for  its  persistence  in  maintaining  level 
relations  of  value  with  the  great  mass  of  agricultural  products. 
The  reason  that  there  has  not  been  a  greater  absolute  fall  of 
silver  may  be  found  in  the  fact  of  its  being  absorbed  to  so  great 
an  extent  by  the  thronging  millions  of  southern  Asia,  and  its  pm*- 
chase  to  so  large  an  extent  until  very  lately  by  the  government  of 
the  United  States  for  purposes  of  token  coinage  and  for  deposit 
as  secm-ity  for  paper  notes.  If  silver  had  really  and  absolutely 
fallen  in  value  to  the  extent  represented  by  the  difference  between 
its  present  price  and  $1.29  per  ounce,  its  par  price  in  the  ratio  of 
16  to  1  with  gold,  every  silver  mine  in  the  Rocky  Mountains,  ex- 
cept a  very  few  of  the  richest  bonanzas,  would  long  since  have 
been  closed  and  abandoned.  It  may  be  asserted  with  a  very  near 
approximation  to  the  fact,  that  there  was  no  absolute  fall  in  the 
value  of  silver  until  the  close  of  the  Indian  mints  in  June,  1893. 
What  appeared  to  be  a  fall  was  merely  a  decline  in  its  gold 
price  because  of  an  appreciation  of  the  latter  metal. 

The  Effects  of  Falling  Prices.  In  presenting  the  conse- 
quences of  shrinking  prices  upon  a  people  of  diversified  interests, 
it  is  perhaps  best  to  consider  the  effects  upon  different  avocations 
rather  than  with  reference  to  individuals. 

Upon  the  Merchant.— In  all  the  different  lines  of  mercantile 
business,  those  goods  for  which  there  is  the  greatest  demand 
because  of  the  greatest  consumption,  are  called  staples;  and  be- 
cause of  the  keenness  of  competition  they  are  handled  on  small 
margius  of  profit.  Because  of  the  active  (Competition,  the  selling 
price  must  and  does  conform  closely  to  the  current  price  in  whole- 
sale markets  regardless  of  the  cost  of  any  particular  lot  to  any 
particular  retailer.  Hence  a  falling  market  will  deprive  the  retail 
merchant  of  all  expected  profit  upon  the  bulk  of  his  sales,  if  it 
does  not  inflict  actual  and  continued  loss.  Purchases  are  cur- 
tailed and  stocks  kept  at  the  minimum,  while  expenses  of  rents, 
insm-ance,  wages,  interest  and  taxes,  etc.,  cannot  be  made  to  con- 
form to  the  diminished  and  unprofitable  business.  What  is  true 
of  the  retailer  is  also  true  of  the  wholesaler,  the  jobber  and  finally 
the  manufacturer  and  the  producer  of  raw  material.  Bankruptcy 
finally  ensues,  for  all  efforts  to  borrow  monej'  and  shuffle  over 
the  temporay  '"bad  spell"  but  digs  the  pit  of  misfortune  deeper 
when  the  decline  persists  through  years  and  decades.  Every  cm*- 
ijailment  of  expenses,  by  the  discharge  of  help  or  reduction  of 


PRINCIPLES    OF    MONEY    AND    COINAGE.  113 

wages  but  aggravates  the  trouble  by  destroyiug  the  purchasiug 
and  consumptive  power  of  the  community. 

Upon  the  Manufacturer.— When  the  market  for  goods  is  de- 
stroyed through  the  inability  of  the  people  to  buj-  and  use  them, 
the  manufactm-er  finds  his  stock  dead  upon  his  hands,  and  also 
an  expensive  plant  and  an  interest  and  tax  account  that  is  as 
persistent  as  time  itself  and  that  knows  no  night  rfor  holiday  nor 
Sabbath.  Even  monopoly  is  of  no  fm-ther  benefit,  for  its  advan- 
tage is  only  realized  in  sales,  and  no  sales  can  be  made. 

Upon  the  Wage  Earner.— Wages  are  not  so  immediately  an- 
swerable to  the  money  standard  as  commodities,  for  the  reason 
that  what  the  wage  earner  sells  is  a  part  of  himself  and  not  a 
senseless,  inert  commodity.  It  is  his  skill  and  his  muscle  and 
where  all  the  higher  grades  of  labor  are  organized,  as  at  present 
in  all  the  leading  nations,  the  rate  of  wages  is  determined  largely 
by  artificial  combinations  to  control  the  suppls'  of  it.  So  the  cur- 
tailed consumption  which  attends  a  long-continued  decline  of 
prices,  is  prolific  of  strikes  and  lockouts.  The  alternatives  pre- 
sented by  organized  labor  are  full  wages  or  no  wages.  If  the 
business  derangement  is  temporary  and  of  short  duration,  the 
employer  will  be  made  to  suffer  nearly  the  whole  loss;  but  if  it 
be  profound  and  fundamental  such  as  a  constantly  exalting  money 
standard  necessarily  implies,  the  result  will  be  no  wages  at  all, 
an  enforced  and  prolonged  want  of  employment,  until  finally 
starvation  enforces  a  conformity  to  the  increased  purchasing 
power  of  money.  When  the  laborer  lacks  employment,  the  wealth 
producing  process  stops,  but  time  and  interest  and  taxes  go  on 
in  their  resistless  march. 

Upon  the  Farmer.— Agriculture  in  this  country  is  the  chief  of 
what  economists  call  tlie  "extractive  industries,"  as  distinguished 
fi-om  manufacturing  industries.  All  its  products  are  staple,  and 
hence  are  those  selected  by  scientists  and  experts  to  test  the  fluc- 
tuations of  the  money  standard.  Never  since  the  corn  laws  of 
England  has  there  been  a  tariff  which  was  even  claimed  by  its 
friends  to  directly  benefit  the  farmer,  and  even  in  the  case  of  the 
corn  laws,  it  was  abtindantly  demonstrated  by  Cobden  and 
Bright  that  the  hereditary  land  owner  and  not  the  actual  farmer, 
was  the  person  benefited.  The  farmer's  products  are  as  a  rule 
free  to  go  in  and  out  of  all  markets.  Tliey  are  the  chief  products 
of  the  land,  essential  to  human  existence,  and  are  produced  and 
sold  and  consumed  in  the  largest  quantities.  Hence  they  are 
especially   sensitive  to  all   changes   in   the   money  standard.     A 


114  PRINCIPLES    OF    MONEY    AND    COINAGE. 

change  of  one-half  of  a  cent  per  bushel  in  the  price  of  wheat  in 
the  Chicago  market,  when  it  is  quoted  at  from  60  to  70  cents,  is 
a  marked  fluctuation,  when  a  difference  of  four  or  five  or  even 
ten  cents  on  a  pair  of  shoes  or  hat  of  the  same  price  would  hai'dly 
be  noted.  Steadily  falling  prices  of  farm  products  rediice  the 
power  of  the  farmer  to  consume  the  product  of  the  manufacturer; 
brings  constantly  increasing  disappointment  in  the  reward  for 
his  labor;  destroys  his  ability  to  meet  the  fixed  charges  of  debt, 
interest  and  taxes;  and  finally  converts  him  from  an  independent 
land  owner  into  a  spiritless  tenant.  If  he  is  not  in  debt  the  in- 
sidious operation  of  a  constantly  exalting  money  standard  wiU 
bring  him  into  debt,  and  once  in  its  meshes  escape  is  next  to 
impossible. 

Upon  the  Debtor.— If  every  man's  debts  were  fixed  in  terms 
of  his  own  products  or  services,  the  condition  of  aU  debtors  would 
be  much  more  secure  than  under  any  money  system.  That  is,  if 
the  laborer's  debt  was  payable  in  so  many  days'  labor,  the  farm- 
er's in  so  many  bushels  of  Avheat,  corn,  potatoes  or  head  of  cattle, 
etc.,  etc.,  the  debtor  would  have  control  of  the  means  of  pay- 
ment. But  it  is  not  so.  Debts  are  payable  in  money  only.  When 
a  debt  is  contracted  there  is  no  assurance  that  money  wiU  be  of 
the  same  value  when  the  time  arrives  for  the  discharge  of  the 
contract.  If  the  standard  of  money  appreciates,  the  debtor  may 
be  required  to  pay  twice  the  value  which  he  received.  Such  is 
the  efCect  produced  by  falling  prices  when  they  result  from  an 
appreciating  money  standard.  The  result  is  bankruptcy  and 
peniu-y  to  the  debtor.  His  debt  is  fixed  in  terms  of  "dollars,"  re- 
gardless of  their  value,  while  his  means  of  payment  are  entirely 
subject  to  the  value  of  the  dollars,  and  as  they  rise  his  property 
shrinks  proportionately. 

People  who  are  neither  debtors  nor  creditors  in  the  ordinary 
meaning  of  those  words,  but  property  owners,  also  suffer.  Taxes 
are  a  fixed  charge,  and  all  property  owners  are  debtors  to  that 
extent.  Aside  from  national,  state  or  municipal  taxation,  rates 
of  transportation  are,  in  an  economic  sense,  a  tax  upon  the  com- 
munities to  which  they  afford  facilities;  and  as  all  railroad  corpo- 
rations are  debtors  to  enormous  amounts,  they  can  to  a  great  ex- 
tent shift  their  increased  burdens  upon  their  patrons.  Viewed 
broadly,  it  is  a  perfectly  transparent  fact  that  all  indebtedness 
of  whatever  kind  or  natm-e  and  its  interest  drain  is  a  bm-den 
upon  the  productive  energies  of  the  people. 


PRINCIPLES  OF  MONEY  AND  COINAGE.  115 

Upon  the  Creditor. — It  is  a  relief  to  find  some  person  or  class 
who  is  benefited  by  an  appreciation  of  money.  The  only  benefi- 
ciaries of  such  a  condition  are  those  who  live  upon  usury  (inter- 
est) or  upon  fixed  incomes.  Both  are  properly  included  in  the 
phrase  "creditor  class."  The  creditor  has  a  contract  to  be  paid 
a  given  and  fixed  number  of  dollars.  As  the  dollars  rise  in  pur- 
chasing power  they  represent  more  and  more  of  commodities  and 
services.  If  money  should  double  in  value,  his  wealth  is  doubled, 
although  it  may  still  be  reckoned  by  the  same  number  of  doUars. 
Persons  holding  long  tenure  or  life  positions  in  public,  corporate 
or  private  service  are  in  a  similar  position.  They  are  the  receiv- 
ers of  money  and  not  the  payers,  in  the  sense  that  what  they  re- 
ceive is  a  fixed  sum,  while  that  which  they  are  required  to  pay 
out  for  subsistence  is  not  fixed  in  amount.  Stated  otherwise, 
what  they  sell  (their  services)  is  at  a  fixed  price,  while  they  buy 
at  the  market  rate,  which  is  constantly  lower  and  lower. 

Every  person  in  active  business  under  current  methods  is  to 
a  greater  or  less  extent  both  a  debtor  and  a  creditor;  but  it  is 
only  those  who  are  permanently  and  largely  creditors  who  derive 
a  net  benefit  from  an  appreciation  of  the  money  standard.  If 
a  person  owns  property  (not  money)  of  the  cm'rent  value  of  $5,000 
and  is  at  the  same  time  a  creditor  for  money  loaned  to  the  extent 
of  $3,000,  he  would  not  be  benefited  but  injured  by  an  appreciat- 
ing standard;  for  the  loss  on  his  property  is  greater  than  tlie 
gain  on  his  money.  This  would  be  the  effect  in  estimating  direct 
results;  and  the  indirect  resvdts  to  such  an  one  would  be  vastly 
more  injm'ious,  for  no  one  with  so  small  a  loanable  capital  can 
live  upon  its  income,  and  the  demoralization  of  industry  and  de- 
preciation of  all  other  property  would  destroy  opportunities  to 
supplement  the  income  by  that  derived  from  other  sources. 

Upon  New  Enterprises  and  Their  Promoters.— Falling  prices 
stop  progress  and  development.  This  is  one  of  the  most  baleful 
effects  of  the  increasing  value  of  money,  and  is  keenly  felt  in 
new  countries  where  the  presence  of  virgin  natural  resources  is 
a  strong  and  constant  temptation  to  incur  debt.  For  this  reason 
new  countries  are  always  debtor  countries.  Tliere  are  new  cities 
and  railroads  to  build,  new  mines  and  farms  to  open  and  a  thou- 
sand avenues  for  the  profitable  employment  of  the  loanable  capi- 
tal which  accumulates  in  older  countries  and  communities,  where 
such  circumstances  no  longer  exist. 

But  owners  of  money  are  like  owners  of  any  other  kind  of 
property;    they  will  not  part  with  that  which  is  increasing  in 


116  PRINCIPLES    OF    MONEY    AND    COINAGE. 

value  iu  exchauge  for  a  thing  which  is  decreasiug  iu  value.  This 
condition  of  things  will  first  stop  buying  and  selling  because  of 
the  want  of  a  buyer,  and  may  for  a  time  increase  the  amount  of 
money  offered  on  loan;  but  if  the  depreciation  continues  so  as 
to  destroy  the  ability  of  borrowers  to  pay  even  the  interest,  then 
lending  will  cease  and  the  money  is  hid  away  in  vaults  ard 
strong  boxes,  the  wheels  of  business  cease  to  turn  and  the  social 
and  industrial  condition  becomes  one  of  complete  stagnation.  It 
is  often  characterized  as  a  want  of  "confidence,"  and  so  it  is;  a 
lack  of  confidence  in  everything  but  money,  but  entirely  too  much 
confidence  in  that.  People  will  always  have  confidence  enough 
in  that  Avhich  is  growing  in  value,  and  little  in  that  which  is  de- 
preciating. 

General  Phenomena.  These  things  will  be  observed  ^vhen 
an  appreciating  money  standard  has  wrought  its  perfect  work: 
Cheap  food  and  empty  stomachs;  cheap  clothing  and  rags  or 
nakedness;  overflowing  wealth  and  abject  poverty.  Men  starve 
in  sight  of  the  farmer's  bursting  barns.  The  farmer,  well  fed 
perhaps,  but  coatless  and  in  hiding  from  his  creditor.  Crime  in- 
creases, and  if  there  is  neither  wisdom  nor  virtue  in  ihe  rulers, 
violence  will  ensue,  and  social  order  be  destroyed. 

The  Remedy.  Depreciate  money!  Make  it  of  less  purchasing 
power.  Make  a  cheaper  standard.  Restore  the  ancient  landmarks 
of  value  which  have  been  so  insidiously  removed.  Restore  the 
just  equilibrium  between  property  and  labor  and  contracts.  Make 
it  possible  for  a  debt  to  be  paid  with  money  of  the  same  value 
as  that  in  which  it  was  contracted.  By  this  means  restore  confi- 
dence in  property  and  the  products  of  labor,  and  thus  make  labor 
and  property  to  be  in  demand.  Depreciate  money,  and  the  cords 
are  severed  which  now  bind  the  people  to  this  body  of  death. 
Open  the  mints  to  the  free  coinage  of  silver  and  every  strong 
box  will  fly  open  and  its  contents  come  forth  to  start  the  wheels 
of  business,  stir  into  activity  every  branch  of  industry  and  in- 
spire with  hope  a  despairing  people.  Owners  of  money  will  then 
thrust  it  upon  those  who  have  none,  in  exchange  for  property 
which  now  has  no  price.  Transfer  the  appreciating  tendency 
from  money  to  property  and  the  products  of  labor. 

An  Awful  Crime.  No  matter  what  differences  of  opinion  may 
exist  as  to  monetary  policies  and  the  details  of  the  subject,  one 
fact  appears  with  the  clearness  and  brightness  of  a  calcium  light. 
Men  and  women  by  millions,  willing  to  work  for  their  daily 
broad,   are   denied    the   opportunity.     AYork   is   the   God-appointod 


PRINCIPLES    OF    MONEY    AND    COINAGE.  117 

way  of  getting  au  honest  living  in  tliis  world,  and  it  cannot  be 
denied  to  people  witliout  the  commission  of  an  awfnl  crime  by 
somebody.  The  mouumetallists  are  in  the  saddle  and  have  been 
for  many  years,  and  must  assume  the  responsibility  for  existing 
conditions. 

Regulating  the  Value  of  Money.  The  Constitution  of  the 
United  States  says  the  congress  shall  have  power  *  *  *  "to 
coin  money,  regulate  the  value  thereof  and  of  foreign  coins,  and 
to^;ir  the  standard  of  weights  and  measures."  I  have  italicized 
two  words  in  this  quotation  for  the  purpose  of  directing  especial 
attention  to  them.  Here  are  foiu*  different  measures  concerning 
which  it  is  made  the  dutj^  of  congress  to  prescribe  standards,  to 
wit:  The  measure  of  value,  the  measure  of  length,  the  measure 
of  weight  and  the  measure  of  bulk.  AVith  regard  to  the  last 
three,  the  language  of  the  constitution  is  that  congress  shall  have 
power  to  "fix,"  that  is,  to  make  stable,  definite  and  invariable 
a  means  of  determining  them.  This  it  is  possible  for  congi-ess 
to  do,  for  length,  weight  and  bulk  are  practicallj^  fixed  conditions 
of  matter.  But  with  regard  to  the  measure  of  value,  an  all  im- 
portant function  of  the  money  which  the  congress  is  to  coin  and 
control,  a  different  word  is  used.  Value  is  not  a  fixed  relation 
of  things.  It  cannot  be  made  stationary  and  immutable.  Hence, 
instead  of  Congress  fixing  the  A'alue  of  money,  an  impossible 
task,  it  was  ifiade  its  duty  to  "regulate"  the  value  of  the  money. 
It  is  just  as  essential  to  have  a  dollar  of  fixed  value  as  a  yard 
or  foot  of  fixed  length,  or  a  pound  of  fixed  weight.  But  natural 
laws  intervene  to  prevent.  So  the  duty  of  regulating  this  stand- 
ard is  specially  delegated  to  the  same  department  of  government 
which  is  authorized  to  make  the  standard.  As  we  have  hereto- 
fore pointed  out,  that  which  is  \ised  as  a  mediiim  of  exchange 
necessarily  becomes  the  measure  or  standard  of  value;  and 
hence  the  power  to  coin  the  mone.y  of  a  people  necessarily  car- 
ries with  it  the  power  to  prescribe  a  standard  of  value,  for  the 
one  act  includes  the  other.  Tliese  two  functions  of  money  above 
nnmod  are  inseparable. 

But  liow  sliall  congress  regulate  the  value  of  money?  How 
can  it  be  done?  It  nuist  lio  clearly  manifest  that  congress  can 
only  increase  or  decrease  the  vahie  of  money  in  conformit.y  with 
the  immutable  natural  law  of  value  creation.  As  the  v.-ilue  of 
money,  like  that  of  everything  else,  arises  from  iiso  (demand) 
upon  the  one  side  and  a  limitation  of  supply  upon  the  otlier, 
tlien   conirress   must   eifliei-   inr-rease   or  decrease    the   di  inaiid   or 


118  PRINCIPLES    OF    MONEY    AND    COINAGE. 

decrease  or  increase  the  supply.  There  are  no  other  alternatives. 
But  if  gold  is  the  standard  money,  can  congress  increase  the 
quantity  or  supply  of  gold?  Certainly  not;  but  it  can  increase 
the  number  of  money  units  in  the  present  stock  of  gold,  by  re- 
ducing the  quantity  of  metal  in  each.  Prices  are  quoted  and  con- 
tracts made  in  terms  of  money  units— dollars.  So  if  the  standard 
metal,  taken  in  the  mass,  rises  in  value,  then  every  money  vmit 
made  of  that  metal  rises  correspondingly.  Congress  can  require 
the  coins  to  be  reminted,  and  if  it  thinks  wise  and  just,  have 
only  half  as  much  metal  put  in  each  dollar.  That  will  double 
the  number  of  gold  dollars  in  a  given  mass  of  the  metal  and  affect 
their  value  accordingly.  While  congress  cannot  increase  by  an 
act  of  legislation  the  quantity  of  gold,  it  can  very  easily  increase 
the  number  of  gold  dollars.  This  is  the  only  alternative  under 
the  single  standard  system. 

Another  method  is  to  reinstitute  genuine  bimetallism  and 
make  the  original  silver  dollar  again  a  standard  coin.  This  would 
re-establish  the  automatic  method  of  regulation,  the  advantages 
of  which,  when  we  come  to  contemplate  the  extreme  friction  and 
confusion  and  expense  attending  a  change  in  the  weight  of  stand- 
ard coins,  are  incomparable.  Both  of  these  methods,  it  will  be 
observed,  affect  the  value  of  money  by  dealing  with  the  supply 
term  of  the  fundamental  formula.  When  we  consider  the  habits, 
education  and  current  methods  of  business  of  the  people  of  the 
United  States,  it  would  seem  impracticable,  if  not  impossible,  to 
deal  effectively  with  the  den  and  term  of  the  formula. 

The  main  pm'pose  however  of  what  is  said  under  this  head 
is  to  direct  attention  to  the  fact  that  it  is  the  duty  of  congress 
under  the  constitution  to  regulate  the  value  of  money;  that  that 
necessarily  means  to  raise  or  lower  its  piu'chasing  power,  and 
that  such  result  can  be  effected  only  by  dealing  with  the  supply 
of  or  the  demand  for  money. 

The  Unit  of  Value.  The  Constitution  of  the  United  States 
says  nothing  about  a  unit  of  value.  The  act  of  congress  of  1792 
establishing  the  United  States  m'nt  also  prescribed  a  uniform 
money  system  for  the  country,  and  in  doing  so  formally  adopted 
our  present  decimal  system  and  prescribed  the  weight  and  fine- 
ness of  the  silver  metal  which  should  constitute  the  doUar  coins 
and  denominated  them  "dollars  or  units."  That  is,  the  dollar  is  1. 
All  coins  of  greater  value  than  the  dollar  were  multiples  of  it, 
and  all  of  less  value,  decimals  of  the  dollar.  The  word  "units" 
as  used  in  this  act  was  undoubtedly  only  intended  to  designate 


PRINCIPLES    OP    MONEY    AND    COINAGE.  119 

the  unit  of  the  money  system,  and  not  to  pi-escribe  what  has 
been  sought  to  be  done  since,  a  unit  of  value.  But  the  revised 
statutes  of  the  United  States,  Sec.  3511,  contains  a  rather  remark- 
able phi-ase.  It  says:  "The  gold  coins  of  the  United  States  shaU 
be  a  one-dollar  piece  of  the  standard  weight  of  25.8  grains,  which 
shall  be  the  unit  of  value,"  etc.,  etc. 

Prior  to  the  time  of  the  enactment  of  this  statute  there"  had 
been  dollar  coins  made  of  both  gold  and  silver,  both  equally  legal 
tender,  and  what  is  perhaps  more  significant,  there  were  paper 
units  or  dollars  which  were  also  legal  tender  without  limit.  But 
nowhere  in  all  the  legislation  upon  this  subject,  prior  to  the  en- 
actment of  the  above  statute,  had  the  phrase  "unit  of  value"  ever 
occurred.  The  significance  of  the  phrase  is  to  be  considered  in 
two  important  bearings: 

First— If  it  has  any  sensible  interpretation  it  means  that  all 
contracts  and  judgments  in  terms  of  money  or  "dollars,"  shall 
thereafter  be  held  to  mean  gold  dollars  of  the  weight  of  metal 
therein  prescribed,  or,  at  the  least,  the  value  of  such  gold  dollars. 
If  greenback  dollars,  or  silver  dollars,  or  treasury  notes,  shall 
thereafter  be  maintained  as  legal  tender,  such  legal  tender  quality 
shall  apply  only  to  the  extent  that  these  various  other  dollars 
have  value  as  compared  to  the  gold  dollar.  Illustration. — Suppose 
that  for  any  one  or  more  of  many  reasons  that  gold  coins  should 
cease  to  circulate  or  remain  the  standard  of  our  markets,  and 
the  silver  dollar  becomes  such  standard.  This  implies  a  differ- 
ence in  value  between  them,  say  to  the  extent  of  one-tenth  or 
ten  cents  on  the  dollar.  That  is,  the  silver  dollar  is  worth  only 
90  cents  in  gold.  Then  if  the  apparent  intent  of  the  statute  in 
question  is  to  be  realized,  the  silver  dollar  could  only  be  used 
to  pay  90  cents  of  debt,  as  the  debtor  has  contracted  to  pay  the 
value  of  a  gold  dollar,  for  that  is  the  only  dollar  that  has  been 
made  a  legal  unit  of  value,  and  he  has  made  his  contract  in  full 
view  of  the  statute.  It  was  the  evident  intent  of  the  statute  to 
avoid  the  fact  that  there  were  several  kinds  of  legal  tender  dol- 
lars and  to  commit  the  people,  the  country  and  the  coiu-ts  to  a 
specific  contract  to  pay  the  value  of  gold  dollars  under  any  and 
all  circumstances. 

Second— What  view  can  we  take  of  this  statute  after  consid- 
ering the  constitutional  duty  of  congress  to  "regulate  the  value" 
of  money?  Is  it  proper  or  constitutional  for  congress,  for  and 
on  behalf  of  the  people,  to  solemnly  agree  to  pay  the  value  of  a 
given,  specific  dollar    of  a  given  and  specific  weight  of  metal. 


120  PRINCIPLES    OF    MONEi    AND    COINAGE. 

wheu  it  is  charged  by  the  fuudamental  law  with  the  power  and 
obligation  to  change  that  weight  or  select  some  other  metal  or 
make  some  other  kind  of  a  dollar  it  equity  demands  it?  To  do 
so  is  to  abdicate,  or  attempt  to  abdicate,  one  of  its  most  impor- 
tant constitutional  functions.  Congress  as  well  as  the  states  is 
forbidden  by  the  constitution  to  enact  ex  post  facto  statutes  or 
laws  impairing  the  obligations  of  contracts. 

Has  not  congress  by  this  act  attempted  to  make  every  con- 
tract entered  into  by  any  citizen  since  that  date  and  in  terms  of 
money,  a  special  contract  to  pay  the  value  of  gold  dollars  of  a 
definite  weight  of  metal?  Ordinarily  and  heretofore,  as  was  said 
in  defining  the  scope  and  purpose  of  legal  tender  laws,  any  con- 
tract for  the  payment  of  dollars  could  be  discharged  by  the  pay- 
ment of  any  legal  tender  dohar  by  name  or  tale,  regardless  of  its 
value.  But  here  is  a  statute  apparently  making  it  an  essential 
and  specific  stipulation  of  every  contract,  to  pay,  not  any  par- 
ticular dollar,  but  an  amount  equal  to  the  value  of  a  particular 
dollar,  and  to  fortify  such  contract  against  all  efforts  for  legiti- 
mate relief,  in  the  ex  post  facto  provision  of  the  constitution 
itself. 


PRINCIPLES    OF    MONEY    AND    COINAGE.  121 


FIFTEENTH  PAPER. 


THE  BRITISH  INDIA  MONEY  PROBLEM. 

The  closing  of  the  East  India  mints  to  the  free  coinage  of 
silver  in  June,  1803,  brought  to  a  climax  the  panicky  conditions 
which  had  prevailed  in  the  United  States  since  the  Baring  fail- 
ure In  London  in  the  fall  of  1890.  The  event  named  leaves  the 
republic  of  Mexico  the  only  considerable  country  in  the  world 
which  coins  silver  into  standard  money.  China  and  Japan  still 
maintain  silver  standards,  but  use  Mexican  silver  dollars  mainly, 
while  in  the  north  of  China  silver  bullion  in  other  forms  is  often 
used  as  a  medium  of  exchange. 

The  standard  coin  and  money  unit  of  India  is  tlie  rupee,  a 
coin  containing  165  grains  of  fine  silver.  "Since  the  closing  of  her 
mints,  these  coins  have  become  mere  tokens  and  no  longer  have 
the  characteristics  of  genuine  standard  money;  but  they  still 
continue  the  only  unit  coins  in  use  there,  and  all  transactions  are 
as  before  reckoned  in  rupees.  The  previous  coinage  policy  of 
India  was  a  free  coinage  but  not  gratuitous,  for  the  government 
made  a  charge  of  about  2  per  cent,  for  tlie  service  of  coining. 
The  effect  of  this  was  to  give  the  rupee  a  value  of  2  per  cent, 
above  that  possessed  by  a  like  weight  of  silver  bullion,  but  that 
relation  of  value  between  the  rupee  and  bullion  was  a  fixed  one, 
and  did  not  and  could  not  vary. 

The  Value  of  the  Rupee,  ^^■ll(•^  gold  mid  silver  were  at  par 
in  the  ratio  of  16  to  1  (the  former  ratio  of  coinage  in  the  United 
States)  tlie  relative  value  of  dollars  and  rupees  were  precisely 
that  of  their  Aveiglit,  barring  only  tlie  -  per  cent,  charge  at  the 
Indian  mints.  Leaving  out  of  view  for  ihc  pi'osent  the  Indian 
mint  charge,  we  ascertain  tlic  former  relative  value  of  rupees  as 
follows:  As  371  1-4  grains  of  fine  silver  was  one  dollar  in  the 
United  States  and  10.")  grains  of  fine  silver  was  a  rupee  in  India, 
then   the  vahie  of  llie  latter  in   tei-ms  of  our  nionev  was  just  as 


122  PRINCIPLES    OF    MONEY    AND    COINAGE. 

much  less  tlian  one  dollar  as  1G5  is  less  than  371 1-4.  Stated  in 
the  form  of  a  sum  in  simple  proportion,  as  371 1-4  grains  are  to 
100  cents,  so  are  165  grains  to  —  cents.  The  answer  is  46.0,  the 
value  of  a  rupee  in  cents.  But  when  the  United  States  resumed 
specie  payments  in  1879,  the  word  "dollar"  no  longer  meant 
371 1-4  grains  of  fine  silver,  but  23.22  grains  of  fine  gold,  for  the 
mints  had  been  closed  to  silver  and  only  gold  was  coined  into 
standard  money.  Silver  was  no  longer  a  money  metal  with  us, 
but  simijly  a  commodity  to  be  bought  and  sold  by  some  other 
standax'd  than  itself. 

As  nearly  all  the  nations  of  Em'ope  closed  their  mints  to  silver 
between  the  years  1871  and  1879  and  adopted  gold  coins  as  their 
only  standard  money  and  measure  of  values,  the  gold  metal  be- 
gan to  rise  in  value  because  of  this  increased  use  of  and  dcnuand 
for  it,  and  the  par  of  value  between  it  and  silver  at  about  the  ratio 
of  16  to  1  was  destroyed.  Instead  of  being  able  to  buy  .  ne  ounce 
of  gold  with  16  of  silver,  it  tooli  17  of  silver,  then  IS  and  19,  and 
so  on  until  now  it  takes  about  29  ounces  of  silver  to  buy  one  of 
gold. 

Since  23.22  grains  of  fine  gold  is  now  the  standard  dollar  of 
the  United  States,  we  find  the  present  value  of  an  Indiiin  rupee 
(supposing  it  still  to  be  standard)  in  terms  of  cents,  by  this  pro- 
cess: As  23.22  grains  of  fine  gold,  our  standard  dollar,  rvill  buy 
29  times  that  weight  of  silver,  which  is  673.38  grains,  and  as 
23.22  grains  of  fine  gold  is  one  dollar  or  100  cents,  then  what 
part  of  that  100  cents  will  165  grains  of  silver  equal?  We  resort 
to  another  sum  in  simple  proportion,  thus:  As  673.38  gi*ains  are 
to  100  cents,  so  are  165  grains  to  —  cents;  and  we  find  the  an- 
swer to  be  something  over  24  cents. 

To  ascertain  the  former  and  present  value  of  the  Indian 
rupee  in  terms  of  English  money,  we  make  the  following  calcu- 
lations: The  English  pound  sterling,  or  "sovereign,"  is  a  standard 
coin  containing  113  grains  and  a  very  small  fraction  of  fine 
gold;  and  the  pound  is  divided  into  20  shillings  and  each  shil- 
ling into  12  pence,  making  240  pence  to  the  pound.  As  the  pres- 
ent market  ratio  between  "the  metals  is,  say  1  to  29,  then  the  1V^ 
grains  of  gold  will  buy  29  times  that  weight  of  silver,  which  is 
3,277  grains.  As  the  pound  sterling  is  240  pence,  then  we  have 
the  following  sum:  As  240  pence  are  to  3,277  grains,  so  are  — 
pence  to  165  grains.  We  find  the  answer  to  be  something  over 
12  pence,  or  one  shilling.  To  ascertain  the  value  of  the  rupee 
when  the  metals  stood  in  the  market  ratio  of  1  to  16,  we  multiply 


PRINCIPLES    OF    MONEY    AND    COINAGE.  123 

the  113  grains  by  16,  which  gives  1,S0S.  Then  our  statement  is, 
as  240  is  to  1,808  so  is  —  to  1G5,  and  find  the  answer  to  be  nearly 
22  pence— 1  shilling  10  pence— as  the  former  value  of  a  rupee  in 
terms  of  English  money.  Thus  by  the  rise  of  gold  the  relative 
value  of  the  rupee  has  declined  from  22  pence  to  12  pence  Eng- 
lish money,  and  from  46  cents  to  24  cents  in  United  States  money, 
both  being  gold  standard. 

The  foregoing  calculations  are  based  upon  the  assumption  of 
an  open  mint  in  India.  Since  her  mints  have  been  closed  to  sil- 
ver, her  rupee  coins  are  nov^  tokens  or  fiat  money,  with  no  fixed 
relation  of  value  between  them  and  either  gold  or  silver  metal. 

A  Digression.  To  digress  a  moment,  it  may  be  both  interest- 
ing and  profitable  to  indicate  the  method  of  comparing  the  values 
of  foreign  moneys  and  goods  with  the  same  in  our  own  countrj'. 
Illustration. — Suppose  a  citizen  of  Mexico  and  one  not  before  well 
posted  upon  the  subject  of  money  standards,  should  arrive  in 
the  United  States  for  the  first  time  and  though  ignorant  of  our 
language,  should  observe  the  exchanges  made  amongst  us  of 
goods  for  silver  dollars  and  vice  versa.  He  is  cm'ious.  By  some 
method  he  discovers  that  our  silver  dollar  has  less  fine  metal 
in  it  than  the  Mexican  silver  dollar,  and  yet  it  will  buy  about 
twice  as  much  goods.  He  begins  to  think  silver  is  worth  a  gi-eat 
deal  more  in  the  United  States  than  in  Mexico  and  a  great  specu- 
lation can  be  made  by  shipping  silver  from  that  country  to  this, 
exchanging  it  for  goods  and  taking  the  goods  to  Mexico  and  ex- 
changing them  for  silver  and  repeating  the  operation  until  he 
very  soon  becomes  rich  in  the  business.  We  will  also  suppose  the 
goods  to  be  such  as  are  not  subject  to  any  tariff  duty  in  his  own 
country.  If  he  attempts  the  money  making  scheme  he  will  soon 
learn  the  difference  between  token  and  standard  money.  He  will 
find  on  arrival  here  with  his  first  shipment  of  Mexican  bullion 
(and  the  same  if  it  is  in  Mexican  coin)  that  the  United  States 
mints  will  not  coin  nor  recoin  it  for  him.  He  will  discover  that 
his  metal,  in  whichever  form  it  may  be,  is  worth  no  more  in  ex- 
change for  goods  than  it  was  at  home,  and  that  the  silver  dollar 
which  ho  had  before  seen  used  in  trade  amongst  us  was  nothing 
but  a  token  for  gold,  made  so  by  a  limited  coinage  on  govern- 
ment account.  Wliile  silver  dollars  in  Mexico  were  merely  pieces 
of  bullion  of  a  special  pattern  made  at  a  free  mint,  and  had  no 
greater  exchange  value  than  that  same  quantity  of  the  metal  in 
any  other  form,  the  silver  dollar  of  the  United  States  was  made 
and  iispd  in  a  vorv  diffcront  iiiannfi'.  niid   tliat   thf   two  wore  no 


124  PRINCIPLES    OF    MONEY    AND    COINAGE. 

more  of  kiu  iu  point  of  their  value  than  if  made  of  entirely  differ- 
ent metals.  Aud  liis  vision  of  millions  will  dissolve  like  Colonel 
Sellers'  eye  water  speculation. 

To  determine  and  compare  the  value  of  coins  and  prices  of 
goods  anywhere  in  the  world,  with  the  same  tilings  at  home,  you 
must  first  know  what  is  the  effective  standard  coin  of  your  own 
country,  aud  which  metal  it  is  made  of.  Next,  you  must  ascer- 
tain what  is  the  effective  standard  coin  of  the  country  and  the 
market  concerning  which  you  are  seeking  to  make  the  compari- 
son, and  wliieli  or  wliat  metal  it  is  made  of.  If  both  are  made 
of  the  same  metal,  then  put  them  on  the  scales,  for  they  are  re- 
lated in  value  just  precisely  as  they  are  in  weight,  reckoning 
fine  metal  only.  If  they  are  made  of  different  metals,  then  you 
must  consult  the  open  bullion  market  relation  of  the  two  metals, 
as  they  are  exchanged  the  one  for  the  other,  at  the  leading  centers 
of  commerce.  But  in  no  case  do  token  coins  cut  the  slightest 
figure  in  the  matter.  Nor  is  it  of  the  smallest  importance  even, 
in  this  connection,  whether  the  token  coins  be  legal  tender  or  not. 

It  is  rather  a  remarkable  circumstance  that  doubts  can  exist 
in  the  mind  of  any  intelligent  student  of  this  subject  as  to 
whether  the  United  States  has  now  an  effective  gold  standard; 
or  that  it  has  ceased  to  have  for  a  single  day  since  the  resumption 
of  specie  payments  in  1879.  It  is  even  more  remarkable  that  any 
expert  would  assert  that  British  or  any  other  brokers  could  at 
any  time  in  the  last  15  years,  or  any  other  time,  buy  United 
States  silver  bullion  at  say  90  cents  an  ounce  and  carry  it  to  the 
Indian  mints  and  by  the  simple  process  of  free  coinage  there 
make  a  large  profit  iu  the  transaction. 

The  Change  Made  In  India.  During  all  the  years  since  1873, 
when  the  nations  began  to  discard  silver  for  standard  money  and 
the  consequent  I'ise  of  gold  began,  the  growing  disparity  between 
the  standards  of  India  and  England  has  given  much  concern  to 
the  officials  of  both  countries.  After  much  correspondence  be- 
tween the  Indian  and  home  governments  and  long  waiting  and 
anxiety  on  the  part  of  the  former  for  the  adoption  of  some  just 
and  equitable  international  ratio  of  coinage,  the  Indian  govern- 
ment at  last,  by  Sir  David  Barbour  one  of  its  officials,  recom- 
mended a  scheme  for  the  abandonment  of  the  silver  standard  by 
India  and  the  adoption  of  the  gold  standard.  This  was  approved 
by  an  English  commission  appointed  for  the  purpose  of  the  in- 
vestigation, with  Lord  Herschell  as  the  chairman,  and  the  change 
was  inaugurated  in  June,  1893. 


PRINCIPLES    OF    MONEY    AND    COINAGE.  125 

The  methud  was  neither  complicated  nor  mysterious.  It  con- 
sisted merely  in  closing  the  Indian  mints  to  the  free  coinage  of 
silver  which  made  the  existing  silver  coins  of  India  simply  tokens, 
and  then  the  practical  redemption  of  these  tokens  in  gold,  at  a 
fixed  and  arbitrary  valuation  to  begin  with.  Just  before  the 
closing  of  the  mints  the  value  of  the  rupee  in  gold  was  1  shilling 
2  1-2  pence  English  money.  The  scheme  of  change  contemplated 
their  redemption  at  the  rate  of  1  shilling  4  pence  English  money. 

The  Method  of  Redemption.  It  is  not  contemplated  in  the 
scheme  that  there  shall  be,  for  the  present  at  least,  any  gold  re- 
demption fund  maintained  in  India,  either  at  the  banks  or  In  the 
hands  of  the  Indian  government  officials,  but  the  condition  sought 
to  be  brought  about  by  limiting  the  manufacture  of  rupees  and 
their  consequent  appreciation  in  the  course  of  time,  is  this:  If 
an  Indian  merchant  buys  goods  in  England,  he  can  pay  for  them 
in  rupees  through  the  methods  of  exchange  by  going  to  his 
banker  and  buying  sterling  exchange  at  the  rate  of  one  shilling 
four  pence  for  each  ruppee  in  bank  to  his  credit.  Likewise,  if 
a  London  produce  broker  buys  wheat,  cotton,  tea  or  other  pro- 
duct in  India,  he  can  pay  for  it  by  going  to  his  bank  and  buying 
rupee  exchange  at  the  rate  of  one  rupee  for  each  one  shilling  fom* 
pence  to  his  credit.  As  a  matter  of  fact  international  trade  is 
mainly  made  up  of  transactions  of  mutual  purchase  and  the  one 
offsets  the  other.  It  is  not  intended  to  say  that  the  individual 
purchaser  and  importer  of  Indian  goods  in  England  is  necessarily 
himself  a  seller  of  a  like  amount  of  English  goods  to  India;  but 
because  of  the  invention  of  bills  of  exchange  and  the  facilities  of- 
fered by  banks  and  clearing  houses,  the  result  in  the  case  under 
consideration  is  precisely  the  same  as  if  he  were.  At  any  rate,  it  is 
hoped  by  the  financial  authorities  engineering  the  change,  that  as 
the  arbitrary  valuation  sought  to  be  given  the  rupee  in  this 
change  was  but  .slightly  above  the  market  value  of  its  material 
at  the  time,  that  the  gap  would  be  easily  closed,  and  that  the 
rupee  would  thus  become  fixed  in  its  relation  of  value  to  English 
gold  money.  It  is  not  altogether  improbable  but  the  scheme  will 
be  sticcessful. 

Reasons  Supporting  the  Experiment.  Many  persons  more  or 
less  expert  in  tliis  feature  of  monetary  science  had  grave  doubts 
about  this  plan  of  furnishing  India  a  gold  standard  without  at 
least  for  the  time  being,  furnisliing  India  some  gold  money.  An 
effective  gold  standard  without  any  gold  seemed  to  thorn  an  ab- 
surdity.    But   some   recent   experiences    of  leading   count i-jes    in 


126  PRINCIPLES    OF    MONEl'    AND    COINAGE. 

monetary  policies  liad  great  weight  with  the  authorities  in  caus- 
ing them  to  launch  the  experiment.  I  will  enumerate  the  more 
important  instances  referred  to: 

First— When  France  closed  her  mints  to  the  free  coinage  of 
silver  about  1875  there  was  in  circulation  a  very  large  mass  of 
silver  coins  which  were  unlimited  legal  tender,  and  which  at 
once  became  tokens.  Their  value  as  they  passed  from  hand  to 
hand  and  in  and  out  of  the  banks  was  no  longer  referable  to 
that  of  the  material  out  of  which  they  were  made  and  bore  no 
fixed  relation  whatever  thereto.  AVhile  the  silver  metal  fell  off 
very  rapidly  in  its  gold  price,  these  silver  coins  remained  stead- 
fastly at  par  with  the  gold  coins  and  have  remained  so  up  to  this 
time,  and  still  retain  their  full  legal  tender  equality.  There  was 
no  provision  of  law  for  their  redemption  in  gold  and  no  actual 
right  of  redemption  either  by  general  or  special  contracts. 

Second— When  the  United  States  resumed  specie  payments  in 
1879,  it  was  upon  the  single  gold  standard,  for  gold  was  the  only 
metal  admitted  to  free  coinage  and  gold  coins  came  into  imme- 
diate use,  so  far  as  the  people  cared  to  use  them,  and  all  other 
forms  of  money  became  at  par  with  them.  Nearly  a  year  before 
the  day  fixed  by  law  for  resumption,  the  government  began  the 
coinage  of  token  silver  dollars  (Bland  law).  They  were  made 
unlimited  legal  tender,  and  were  wholly  irredeemable  by  any 
provision  of  law,  either  express  or  implied.  Their  coinage  con- 
tinued at  the  rate  of  two  millions  per  month  up  to  July,  1890. 
More  than  four  hundred  million  dollars  altogether  have  been 
coined  and  passed  into  use  either  as  coins  or  by  means  of 
certificates,  and  all  have  remained  at  an  unerring  par  with  gold 
coins  up  to  date.  While  a  redemption  fund  of  $100,000,000  in 
gold  was  provided  for  the  legal  tender  greenbacks,  no  redemption 
fund,  either  near  or  remote,  has  ever  been  provided  or  suggested 
for  these  silver  dollars.  While  the  material  in  the  silver  dollar 
has  dropped  as  low  as  55  cents  compared  to  the  gold  dollar,  yet 
the  coin  itself  has  always  maintained  an  equal  purchasing  power, 
or  exchange  value,  with  gold. 

These  instances  hardly  satisfied  the  doubters,  for  as  France 
and  the  United  States  both  used  standard  gold  coins  alongside 
of  their  silver  tokens,  it  remained  to  be  imagined  that  this  coin- 
cidence of  use  had  some  mysterious  influence  in  producing  the 
parity. 

Third— A  third  instance  was  however  found  exactly  in  point. 
The  island  of  Java  is  a  Dutch  dependency,  a  part  of  what  is 


PRINCIPLES    OP    MONEY    AND    COINAGE.  127 

sometimes  called  "Netherlands  India,"  containing,  with  the  adja- 
cent straits  settlements,  a  population  of  twenty  millions  of  peo- 
ple. The  money  in  use  is  the  Dutch  guilder  or  florin,  a  token 
silver  coin  made  in  Holland  and  used  also  in  Holland  as  a  token 
subsidiary  to  its  standard  gold  coins,  but  not  by  law  redeemable 
in  gold  either  in  Holland  or  Java.  There  are  no  gold  coins  used 
in  Java,  and  yet  by  means  of  this  guilder  (and  some  smaller 
tokens)  the  exchanges  and  payments  in  trade  in  the  Island  of 
Java  and  between  Java  and  Holland  and  other  countries  of  Europe 
are  kept  at  a  fixed  relation  of  value  to  Holland's  gold  standard. 
The  guilder  was,  up  to  about  1875,  coined  free  at  the  Holland 
mint,  and  was  consequently  up  to  that  time  a  standard  coin  and 
while  such  was  introduced  into  use  in  Java.  Afterwards  when 
the  mint  of  Holland  was  closed  to  silver,  the  guilder  continued 
in  use  both  in  Holland  and  Java  wholly  unaffected  by  the  fluctu- 
ations of  the  silver  metal  in  its  relations  to  gold. 

It  was  in  view  of  and  because  of  these  experiences  of  other 
nations  that  British  financiers  and  statesmen  consented  to  the 
present  method  of  giving  India  a  gold  standard  without  any 
gold. 

Why  a  Change  Was  Made.  A  careful  examination  of  the 
reasons  assigned  why  a  change  of  standard  in  India  was  deemed 
desirable  will  throw  a  strong  side  light  upon  the  subject,  much  to 
the  profit  of  people  of  other  nations  if  they  care  to  study  the 
matter.  It  is  much  easier  to  see  the  mote  in  our  neighbor's  eye 
than  the  beam  in  our  own. 

First— There  are  a  large  number  of  Englishmen  in  civil  and 
military  employment  in  India  who  are  upon  fixed  salaries  paya- 
ble in  rupees.  Their  homes  are  in  England,  the  families  of  many 
remain  in  England,  their  children  are  educated  there,  and  their 
savings  are  converted  into  English  money  and  sent  back  tliei*e. 
Since  gold  has  so  largely  appreciated  these  men  find  their  sal- 
aries very  much  shrunken  when  they  come  to  convert  them  into 
sovereigns.  Formei-ly  10  rupees  would  buy  a  pound  sterling. 
Now  it  takes  15.  All  this  class  have  had  a  serious  grievance,  and 
they  are  as  a  body  influential  with  India's  British  governors. 

Second— India  owes  to  citizens  of  Great  Britain  a  large  sum 
of  money  advanced  in  biiilding  her  railways,  canals  and  for 
many  other  purposes,  which  is  a  debt  payable  principal  and  in- 
terest in  gold  and  the  means  to  pay  which  is  raised  largely,  if 
not  exclusively,  by  taxation.  The  yearly  payments  of  interest 
alone  are  estimated  at  a  sum  equivalent  to  ."^SO.OOO.OOO  of  our 


128  PRINCIPLES    OF    MONEY    AND    COINAGE. 

money.  Taxes  are  levied  iu  India  puj'able  in  silver  rupees.  The 
officials  at  tlie  beginning  of  the  tiscal  year  would  estimate  the 
number  of  rupees  that  would  be  required  to  pay  the  interest  due 
the  coming  year,  taking  the  rupee  at  its  then  value  in  English 
gold,  say  for  illustration,  22  pence  per  rupee,  and  lay  the  tax  ac- 
cordingly. But  before  the  end  of  the  year  came  the  rupee  liad 
dropped  (gold  risen)  to  20  pence  to  the  rupee.  The  result  woiild 
be  a  deficit.  They  wouldn't  get  rupees  enough  to  pay  the  debt. 
The  next  year  they  would  estimate  the  rupee  at  20  or  19  pence 
and  increase  the  taxes  so  as  to  yield  more  rupees,  but  very  likely 
before  the  year  was  up  the  rupee  would  only  be  worth  18  pence  in 
gold  (another  upward  hitch  in  that  metal)  and  another  deficit 
would  be  the  result.  And  so  on  year  after  year  levying  more 
and  more  taxes  but  still  a  deficit  at  the  end  of  each  year,  until 
the  limit  of  endurance  upon  the  part  of  taxpayers  had  been 
reached,  or  was  thought  to  be,  when  something  else  must  be 
done. 

Third— Now  for  the  taxpayers.  The  people  who  pay  the  taxes 
in  India  are  not  conscious  that  silver  has  become  cheap.  The 
price  of  their  commodities  in  rupees  has  not  gone  up.  They  get 
no  more  upon  the  average  for  their  wlieat,  their  cotton,  their  tea, 
nor  any  other  product  than  they  did  in  former  years.  A  rupee 
costs  them  as  much  as  it  ever  did,  so  the  result  has  been,  as  the 
tax  gatherers  demanded  more  and  more  rupees  year  by  year,  it 
took  more  and  more  wheat  and  cotton  and  all  other  products  to 
meet  the  demand.  If  the  reason  for  the  increase  of  taxation  had 
really  been  a  fall  in  the  value  of  silver,  it  would  have  made  no 
difference  to  the  Indian  farmer  for  he  woidd  have  received  more 
silver  for  his  products  and  could  have  paid  more  taxes  and  still 
stood  in  the  same  condition  as  before.  This  condition  of  things 
in  India  (and  a  like  experience  in  Mexico)  seems  to  be  conclusive 
that  the  world  wide  trouble  is  due  to  a  rise  in  gold  rather  than 
to  any  great  fall  in  silver. 

Fourth— As  it  affects  the  English  capitalist  and  discourages 
the  investment  of  sterling  money.  India  is  of  vast  territorial  ex- 
tent and  comprises  240,000,000  or  more  of  people.  There  is  an 
inviting  field  for  the  inA'estment  of  money  in  the  development  of 
natural  resom-ces  and  supplying  the  conveniences  and  needs  of 
so  numerous  a  people  just  on  the  threshold  of  modern  civiliza- 
tion. If  an  English  capitalist  converts  his  wealth  into  money 
for  the  purpose  of  investing  it  in  Indian  enterprises,  he  has  it  in 
gold  or  its  equivalent.    To  invest  it  in  India  he  must  convert  it 


PRINCIPLES    OF    MOJSEY    AND    COINAGE.  V2\) 

iuto  silver.  He  parts  with  a  thing  wliich  is  iucreasiug  iii  vahie 
for  a  thing-  which,  we  will  say  for  the  pui-pose  of  our  argument, 
is  stationary  in  value.  When  he  has  prosecuted  his  Indian  un- 
dertaking for  Ave  or  ten  years,  to  his  satisfaction  so  far  as  nom- 
inal profits  are  concerned,  and  comes  to  reconvert  his  capital 
with  accrued  profits  into  gold  again,  he  finds  that  it  takes  all  his 
present  capital  and  his  profits  also  to  get  back  the  original  gold 
he  started  with,  so  rapid  has  been  the  appreciation  of  that  metal 
in  the  meantime.  So  he  finds  in  the  end  that  if  he  had  buried 
his  gold  for  five  or  ten  years  he  would  now  be  just  as  well  off 
and  have  saved  all  the  risk  and  labor  of  active  business.  So  it 
is  that  appreciating  money  discourages  active  enterprise  always 
and  everywhere. 

Fifth — As  it  affects  the  English  trader.  This  cause  of  com- 
plaint has  been  presented  for  the  intelligent  reader  in  what  has 
heretofore  been  said  in  these  pages  in  illustration  of  Par  of  Ex- 
change. 

India  Exchange.  In  all  discussions  and  news  of  interna- 
tional business  with  India,  referring  to  a  time  previous  to  the 
recent  closing  of  the  Indian  mints,  where  mention  is  made  of  the 
price  or  rate  of  "exchange"  on  that  country,  if  the  word  silver  is 
substituted  for  exchange,  it  will  be  more  intelligible  to  many 
people  and  they  mean  the  same  thing.  So  also  now  in  reference 
to  "Eastern  Exchange,"  meaning  bills  on  China  or  Japan. 

To  Stop  the  Fall  of  Silver.  The  object  of  the  present  British 
policy  in  India  is  not  to  stop  the  so-called  decline  in  the  gold 
price  of  silver.  To  close  the  Indian  mints  to  that  metal  could  not 
logically  operate  otherwise  than  to  accelerate  that  decline  by 
cutting  off  one  of  the  greatest  demands  for  the  metal.  It  was  to 
cut  loose  or  separate  the  Indian  money  system  from  the  silvoi- 
bullion  market  of  the  world  and  tie  it,  so  to  speak,  to  tlie  world's 
gold  metal  market.  Now  the  gold  price  of  silver  may  sink  to  any 
imaginable  level  and  it  will  nol  affect  the  value  of  the  Indian 
rupee  nor  the  prices  of  commodities  in  any  Indian  market.  The 
value  of  the  rupee  is  now  like  that  of  the  United  States  silver 
dollar,  wholly  divorced  from  that  pertaining  to  tlu>  metal  in  other 
forms. 

Whatever  actual  and  absolute  fall  has  occm-red  in  tlic  value 
of  silver  could  not  directly  injure  any  interests  except  that  of 
silver  mining  and  tliose  intimately  connc^'led  witli  it  in  the  mining 
regions.     It   could   not  increase   the  farm    moi-tgages  in   Illinois, 


130  PRINCIPLES    OF    MONEY    AND    COINAGE. 

nor  throw  out  of  employment  and  plunge  into  banla-uptcy  and 
misery  hundreds  of  thousands  in  the  Middle.  Eastern  and  Southern 
States.  But  the  rise  of  gold  can  do  and  has  done  all  this  evil. 
Stop  the  rise  of  gold  and  the  appearance  of  a  "fall"  of  silver  will 
disappear. 


PRINCIPLES    OF    MONEY    AND    COINAGE.  131 


SIXTEENTH  PAPER. 


A   "FIAT"    OR   PAPER   MONEY    SYSTEM— LABOR   NOTES- 
CONCLUSION. 

Auy  elementary  treatise,  such  a:  this  pui'ports  to  be,  would 
be  incomplete  without  some  reference  to  the  cardinal  doctrines 
underlying  what  is  often  termed  in  popular  parlance  "fiat"  money 
or  a  fiat  system  of  money.  It  is  hardly  necessary  to  say  that  the 
word  "fiat"  has  no  proper  significance  in  connection  with  this 
subject.  The  word  means  a  decree,  a  declaration,  a  thing  done 
or  said.  As  sometimes  tersely  stated,  if  congress  shall  by  law- 
cause  to  be  printed  upon  a  piece  of  paper  the  legend,  "This  is  a 
dollar,"  and  shall  make  it  a  legal  tender  for  all  debts,  that  such 
a  piece  of  paper  is  a  dollar  and  as  good  as  any  dollar. 

No  one  can  reasonably  question  any  part  of  this  statement 
except  perhaps  as  respects  the  goodness  of  such  a  dollar.  As 
the  word  dollar  is  simply  and  only  a  name,  it  is  perhaps  within 
the  constitutional  power  of  congress  to  confer  any  name  it 
pleases  upon  auy  thing  it  pleases.  It  is  certainly  the  natural 
right  of  any  individual  to  do  ttie  same  thing,  provided  he  avoids 
the  statutes  against  slander.  So  also,  as  congress  has  been  given 
by  the  constitution  discretionary  power  over  the  whole  subject 
of  money,  it  may  make  such  a  piece  of  paper  by  that  name  a 
legal  tender  in  the  payment  of  debts  and  dues;  but  the  mere  ex- 
ei'cise  of  a  constitutional  power  by  congress  in  bestowing  a  name 
and  decreeing  a  legal  tender,  is  not  all  that  is  necessary  to  make 
a  good  money.  The  most  essential  quality  of  money  is  valu(>, 
and  all  the  congresses  and  potentates  in  the  world  combined  can- 
not by  simple  decree  or  edict  create  an  iota  of  value.  No  doubt 
the  thoughtful  reader  of  these  papers  has  had  frequent  occa.uon 
to  revert  to  the  first  two  numbers  and  the  formula  of  value  crea- 
tion there  set  forth.  The  one  natural,  universal  and  immutable 
law  governing  the  creation  of  commercial  value  has  the  same 
supremacy   over  the   powers   of  congresses   and   human   govern- 


132  TRINCIPLES    OF    MONEY    AND    COINAGE. 

ments  of  all  kinds  as  has  the  law  of  gravitation  or  that  of  the 
chemical  affinities.  Congress  may  have  the  power  to  compel  the 
acceptance  of  a  worthless  thing  in  tlie  requital  of  a  debt;  but  tiie 
exercise  of  that  naked  power  alone  does  not  make  the  worthless 
thing  valuable. 

The  Theory  of  An  Exclusive  Paper  Money  System.  The  fore- 
going remarks  do  not  however  fairly  indicate  the  scientific  basis 
of  the  paper  money  theory.  Its  more  intelligent  advocates  are 
well  aware  of  the  great  natural  law  of  value  and  make  their  sys- 
tem to  harmonize  with  it.  It  is  asserted  that  the  material  of 
money  is  not  an  important  matter,  but  that  value  is  the  chief  of 
all  the  essentials.  There  is  no  function  of  money  which  demands 
that  it  shall  have  any  particular  hardness  or  softness  or  density 
or  weight  or  ductility  or  malleability  or  color  or  any  other  special 
physical  characteristic.  That  it  shall  have  the  necessary  vahie 
and  be  convenient  to  handle  and  transport  is  all  that  is  impor- 
tant. If  its  material  be  indestructible  all  the  better,  for  that 
saves  the  cost  of  replacement.  If  it  can  have  the  requisite  value 
without  a  great  cost  in  its  production,  then  there  is  that  much 
of  human  labor  saved  in  the  creation  of  a  tool  of  exchange,  a  net 
gain  to  society.  It  is  claimed  that  an  exclusive  paper  money  can 
be  made  to  possess  the  more  important  of  these  merits  in  a  pre- 
eminent degree. 

The  Value  of  Paper  Money.  But  the  question  arises,  how 
can  an  irredeemable  paper  dollar  be  made  to  have  the  value  which 
pertains  to  a  gold  or  a  silver  or  some  other  metal  dollarV  The 
answer  offered  is,  that  everything  has  a  value  proportioned  to  its 
uses  as  compared  to  its  volume  fir  quantity,  and  that  there  is 
no  discoverable  reason  why  this  law  should  not  and  does  not 
apply  to  paper  dollars  as  well  as  gold  dollars  or  any  other  kind. 
Gold  has  a  value  only  because  people  use  it  and  want  it  and  there 
is  a  natural  limitation  of  the  supply.  If  people  will  use  and  want 
paper  dollars  and  there  is  a  reliable  artificial  limitation  of  sup- 
ply, why  should  they  not  have  an  equally  great  value?  Further 
than  this,  as  stability  in  value  is  the  prime  requisite  of  a  just 
and  honest  money,  paper  is  better  than  gold  because  the  supply 
which  is  the  main  factor  in  value  fluctuations  is  under  complete 
control  and  can  be  regulated  by  a  per  capita  or  some  other  rule 
with  much  greater  precision  th  m  in  the  case  of  gold,  which  is 
subject  in  its  value  to  its  world  wide  use  and  the  accidents  of 
its  production  from  mines,  as  well  as  the  great  variety  of  its  ap- 
plications in  the  industries  and  arts.     A  superior  convenience  is 


PRINCIPLES    OF    MONEY    AND    COINAGE.  133 

claimed  for  paper  mouoy,  because  the  difference  between  small 
and  large  sums  is  merely  a  matter  of  denominations,  while  with " 
gold  a  larger  sum  must  necessarily  be  a  greater  bulli  and  weight 
than  a  smaller  sum.  Finally,  as  touching  the  value  of  papor 
money,  it  is  claimed  to  depend  wholly  upon  the  answers  to  two 
questions:  First— Will  the  people  use  it,  seek  it,  strive  for  it, 
prize  it  and  give  their  labor  and  property  for  it?  Second— Will  its 
volume  or  quantity  be  properly  and  rigidly  limited? 

Objections.  Tlie  main  objections  to  a  paper  money  system 
are  as  follows: 

First— That  because  its  value  depends  upon  its  quantity  or 
volume,  and  because  its  material  is  so  abundant  and  cheap  and 
the  process  of  its  manufacture  so  simple  and  inexpensive,  there 
can  be  no  assurance  tliat  a  congress  elected  by  popular  vote,  and 
amenable  in  a  large  degree  to  the  temporary  whims  and  passions 
of  the  masses,  will  prove  superior  to  the  temptations  to  an  ex- 
cessive issue  and  its  consequent  depreciation. 

Second — That  as  such  a  money  would  necessarily  be  a  na- 
tional and  domestic  money  only,  there  could  be  no  fixed  relation 
of  vahie  between  it  and  the  money  of  other  nations  which  use  a 
standard  metal  system,  nor  even  with  that  of  another  nation 
which  used  the  same  system  with  other  money  names  and  per- 
haps a  more  varying  volume.  There  could  be  no  par  of  exchange 
between  nations. 

Third — That  such  a  money,  though  meeting  with  universal 
national  acceptance,  and  though  properly  regulated  in  volume, 
would  nevertheless  be  ultimately  dependent  for  its  value  upon 
the  stability  of  tlie  particular  government  instituting  it.  Govern- 
ments have  potent  and  insidious  foes  both  within  and  without; 
and  through  force  of  education  or  a  natural  instinct,  a  large  num- 
ber of  people  demand  a  money  which  will  sm'vive  the  destruction 
of  governments  and  the  wreck  of  all  civil  institutions.  Pieces  of 
gold  or  silver  bullion  alone  constitute  such  a  money,  in  con- 
venient form.  The  instinct  which  prompted  their  selection  orig- 
inally for  money  uses,  as  related  in  a  former  paper,  is  still  strong 
in  the  minds  of  a  majority  of  persons.  It  may  be  imcompliment- 
ary  to  our  reason  and  the  quality  of  our  patriotism,  but  it  is  true, 
that  we  demand  a  degree  of  security  and  sanctity  for  that  par- 
ticular part  of  our  wealth  which  consists  of  money,  wliich  we  are 
willing  to  forego  or  disregard  witli  respect  to  all  other  kinds  of 
property.     There  is  a  charm  about  money  which  is  concrete  and 


134  PRINCIPLES    OF    MONEY    AND    COINAGE. 

immediately  convertible   wealth,   that  does   not  attach   to  other 
valuable  things. 

Labor  Note  Money.  There  is  still  another  kind  of  money, 
confined  as  yet  to  the  realm  of  speculative  philosophy,  wliich  it 
may  be  worth  while  to  mention,  more  for  the  pm-pose  of  illus- 
trating a  fundamental  money  principle,  than  for  anything  prac- 
tically important  about  it.  This  is  what  may  be  called  Lfabor 
Notes.  Heretofore  we  have  considered  standard  metal  money 
made  of  gold  or  silver,  token  coins  and  so-called  fiat  paper.  With 
respect  to  each  of  these  kinds  the  reader  has  observed  that  the 
money  itself  is  valuable  and  that  there  is  no  fixed  relation  of 
value  between  a  piece  of  any  one  of  these  kinds  of  money  and 
any  item  of  property  or  quality  or  kind  of  service  for  which  it 
may  be  exchanged.  Prices  will  vary.  The  value  of  the  com- 
modities upon  the  one  hand  or  that  of  the  money  upon  the  other, 
is  entirely  free  to  fluctuate  with  every  changing  relation  of  sup- 
ply and  demand,  and  exchanges  made  are  upon  terms  agreed 
upon  between  the  individual  owners  or  as  a  result  of  what  Adam 
Smith  calls  "the  higgling  of  the  market."  Not  so  with  labor  note 
money.  All  commodities,  properties  and  services  are  rated  by 
authority  according  to  their  cost  of  production  in  labor,  taking 
an  hour  or  a  day  as  a  unit  of  time  by  which  to  estimate  the  labor, 
classifying  it  according  to  skill,  etc.  The  producer  receives  labor 
notes  in  terms  of  "units"  to  the  amount  of  the  cost  of  the  product 
in  hours  of  toil.  The  product  is  labeled  with  such  cost  in  a  like 
number  of  "units,"  and  that  is  its  price  in  labor  notes  to  any  one 
who  offers  them  in  exchange.  No  increase  or  decrease  of  out- 
standing labor  notes  nor  of  the  commodities  in  store  will  affect 
prices.  The  exchange  relations  between  them  are  fixed  and  un- 
fluctuating. 

Such  notes  have  no  commercial  value  such  as  attaches  to 
and  characterizes  money  m  aU  of  the  forms  heretofore  con- 
sidered. They  are  merely  "store  orders,"  transferable  by  de- 
livery, for  any  one  of  a  thousand  things,  at  a  fixed  ratio  of  re- 
demption. In  other  words,  they  are  society's  orders  on  society's 
store,  and  can  no  more  be  said  to  have  a  commercial  value  than 
could  the  order  of  a  great  employer  written  in  pencil,  directing 
one  employe  to  deliver  to  another  employe  a  spade.  Such  a  sys- 
tem of  money  and  exchanges  would  be  possible  only  in  case  gov- 
ernment is  organized  into  a  gigantic  corporate  monopoly,  in  which 
every  citizen  is  an  equal  stockholder,  which  contsitutes  a  condi- 
tion of  ideal  socialism. 


PRINCIPLES    OF    MONEY    AND    COINAGE  13". 

Conclusion.  The  Funding  System,  with  its  accompimiment 
of  a  vast  and  increasing  mass  of  private  indebtedness;  and  usury 
or  interest,  the  baneful  concomitant  of  all  debt,  constitute  fea- 
tures of  the  existing  fiscal  situation  of  the  world  of  an  impor- 
tance that  can  hai-dly  be  exaggerated.  It  is  not  too  much  to  say 
that  debt  and  usury  are  the  most  serious  existing  menaces  to 
our  civilization.  But  the  limits  of  this  small  volume  do  not  per- 
mit a  more  extended  analysis  or  reference  to  these  topics  than 
has  been  heretofore  made. 

The  issue  of  paper  money  supplementary  to  a  metal  standard 
is  a  matter  of  great  importance,  but  decidedly  of  minor  impor- 
lance  when  compared  to  the  selection  and  adrainisti-ation  of  tlio 
metal  standard  Itself,  so  long  as  such  a  system  is  maintained 
and  made  effective.  Likewise  also,  every  form  of  credit  which 
may  be  used  as  a  substitute  for  money.  All  are  subordinate  to 
the  metal  standard.  Bank  credits  which  to  some  extent  consti- 
tute a  substitute  for  money,  and  which  devices  and  their  wide  use 
and  gi'eat  convenience  are  often  urged  as  a  means  of  avoiding  or 
diverting  arguments  directed  to  the  metal  standard,  are  especially 
subordinate  to  the  metal  money  basis,  and  constitute  the  weakest 
and  most  dangerous  featiu-e  of  existing  fiscal  devices. 


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DENVER 


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EACHES  an   Agricultural 

•  ■  •  •  Section 

Second  to  None 

in  the 

United  States 


PRINCIPAL  TOWNS   LOCATED    ON   THIS 
LINE    IN     NORTHERN     COLORADO    ARE 


Finest 

Potatoes 

in  the   World 

are  raised 

in  this 

Section 


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FORT   COLLINS,    Population    3,500 
LONGMONT,    Population,    2,000 
LOVELAND,    Population,    r,500 
GREELEY,    Population,    2,500 


THROUGH    LINE 


DENVER  TO  TEXAS 

AND  ALL  PRINCIPAL  CITIES  IN  THE  SOUTH 


DA  Y  IN  THE 
ROCKIES 


When  in  Colorado,  don't  fail  to 
visit 

THE  LOOP 


This  is  the  onix  line  that  can  offer  a  trip  through  the  Rocky  Mountains 
and  return  same  dav,  from  Denver. 


FRANK  TRUMBULL, 

Receiver. 


F.  B.  SEMPLE, 

General  Passenger  Agt. 


DENVER,   COLO. 


UNIVERSITY  OF  CALIFORNIA  AT  LOS  ANGELES 

THE  UNIVERSITY  LIBRARY 
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